Best Suppliers of Oyu Tolgoi Upholding Health, Safety Principles will be Recognized

Ханбогд, Даланзадгад болон Өмнөговийн бусад суманд үйл ажиллагаа эрхэлдэг 3 ханган нийлүүлэгч орон нутгийн шилдгээр шалгарна

Монгол улс, Улаанбаатар (ot.mn) Оюу Толгой ХХК 2011 оны шилдэг ханган нийлүүлэгчийн шагнал гардуулах “Эрдэнийн Говь” арга хэмжээг энэ Пүрэв гарагт зохион байгуулж шилдэг 20 ханган нийлүүлэгчийг шалгаруулах бөгөөд эдгээрийн дундаас орон нутгийн хөгжилд хувь нэмрээ оруулж буй Ханбогд сумын шилдэг ханган нийлүүлэгч, Даланзадгад сумын шилдэг ханган нийлүүлэгч болон Өмнөговь аймгийн бусад суманд үйл ажиллагаа явуулдаг шилдэг ханган нийлүүлэгч ангиллаар 3 аж ахуйн нэгжийг тодруулах юм.

Оюу Толгой ХХК-ийн Бүс нутгийн хөгжил, нийгмийн асуудал эрхэлсэн Дэд захирал Т.Баярсайхан, “Манай компанийн эн тэргүүний зорилт бол орон нутгийн хөгжлийг дэмжих бодлого, түүний хэрэгжилт билээ. Өмнөговь аймгийн Даланзадгад, Ханбогд, Манлай, Баян-Овоо зэрэг уурхайн нөлөөллийн сумдад төслийн сөрөг нөлөөллийг бууруулах, орон нутгийн усан болон цахилгаан хангамжийг сайжруулах, ажлын байр бий болгох, хөдөлмөрийн эрхлэлтийн чадавхийг дээшлүүлэх, нутгийн соёлын өвийг хамгаалах, иргэдийн эрүүл мэндийг дэмжих чиглэлээр дорвитой ажлуудыг үр бүтээлтэй, амжилттай хийж гүйцэтгэхэд орон нутгийн ханган нийлүүлэгч, үйлчилгээ үзүүлэгч компаниудын оролцоо, үүрэг хамгийн чухал юм” гэж онцоллоо.

Орон нутгийн бизнес, жижиг дунд үйлдвэрлэлийг дэмжих зорилгоор Оюу Толгой ХХК 1,5 тэрбум төгрөгийн хөнгөлөлттэй зээлийн эх үүсвэрийг гаргаж ХААН болон Хас банкны орон нутгийн салбарт байршуулан зээл олгож эхэлсэн 2010 оноос хойш өдгөө 84 бизнес эрхлэгчид 850 гаруй сая төгрөгийн зээл авч шинээр бизнес эрхлэх, бизнесээ өргөтгөх боломжтой болоод байгаа билээ.

Мөн Өмнөговь аймгийн 9 сумын нийт 200 гаруй ханган нийлүүлэгчид Оюу Толгой төсөлд нийт 3,2 тэрбум төгрөгийн ажлын хувцас, оёмлол нэхмэл бүтээгдэхүүн, ус, хүнсний бүтээгдэхүүн, гар урлалын зүйлс, барилга угсралтын ажил гэх зэрэг бараа үйлчилгээг ханган нийлүүлсэн үзүүлэлтээр 2011 оныг үдсэн байна. Түүнчлэн аймгийн төвд байрлах орон нутгийн ханган нийлүүлэгчдийн чадавхийг бэхжүүлэх зорилго бүхий Бизнес хөгжлийн төвийг Оюу Толгойн хөрөнгө, санаачилгаар байгуулснаас хойш өдгөө 6 мянга гаруй бизнес эрхлэгчид, нутгийн иргэдэд хүрч үйлчлээд байна.

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Х.Алтайн ярилцлага

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Mongolian Mining Said Near $465 Million Purchase of Mine

June 1 (Bloomberg) -- Mongolian Mining Corp., the nation’s biggest coking coal exporter, is close to buying a Mongolian mine from a unit of Kerry Holdings Ltd. for $465 million, according to two people with knowledge of the matter.

Mongolian Mining plans to pay about $380 million in cash and issue $85 million of convertible bonds, said the people, who asked not to be identified because the deal hasn’t been announced. The QGX coking coal mine, bought by a unit of Kerry Holdings in 2008, is adjacent to one already owned by Mongolian Mining, the people said.

Prices for coking coal, one of two key steelmaking raw ingredients, rose to a record in the first 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.

An announcement may come as soon as today, said the people. Calls to Mongolian Mining and Kerry Holdings after regular business hours weren’t returned.

Mongolian Mining, based in Ulaanbaatar, 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.

It 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.

Australian Floods

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.

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.

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.

--With assistance from Jesse Riseborough in London Editors: John Viljoen, Tony Barrett

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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Mongolia Targets $700 Million in Debut Domestic Bond Sales From This Month

Mongolia’s newly created development lender is aiming to sell $700 million of domestic-currency bonds in 2011, with sales scheduled to begin this month, the bank’s chairman said.

Investors will be offered tugrik-denominated bonds due in five, 10, and 15 years in several sales from the end of this month to around September, Chuluundorj Khashchuluun, the Ulan Bator-based chairman of the Development Bank of Mongolia, said in a telephone interview yesterday. The bonds will be backed by the government, which has approved the sales, he said.

“In a week or two we will have another meeting with investors to make more concrete plans” to set terms for the initial sale, Khashchuluun said. The central bank and finance ministry are involved in “extensive consultations” on the sales, he said.

It will be the first sovereign offerings by the resource- rich nation that needs to quadruple the size of its rail network, add power and water plants, and build more roads before it can increase metal and mineral exports. New transport projects would also help Mongolia ease its economic reliance on its neighbor China, which took nearly 80 percent of shipments last year, according to official data.

The bonds will be offered via the stock exchange and the central bank, with a private placement also possible, Khashchuluun said. The size of the offering may be adjusted to reflect market demand and also bring in a wide range of investors with the number of sales not yet decided, he said. Domestic banks and international investors have shown interest in the debt and yields are being discussed, Khashchuluun said.
Surging Tugrik

Moody’s Investors Service rates Mongolian sovereign debt B1, four levels below investment grade, while Standard & Poor’s rates the North Asian nation BB-, three levels below investment grade. Moody’s rates Mongolia the same as Sri Lanka, which sold 10-year bonds to yield 6.25 percent in September last year.

“The bank’s lending can’t be very costly, because it is policy-based financing,” Khashchuluun said. Although, rates have to be high enough to attract investors, he said. “So it demands a balance.”

The tugrik has strengthened 18.2 percent against the dollar since the beginning of last year, the second-best performance among all currencies tracked by Bloomberg after the Australian dollar.

The government has tasked Development Bank of Mongolia, which opened yesterday, to help finance rail, road and other infrastructure projects as well as the building of an industrial park. The bank is in a hurry to start the sales so that it can access funding before construction stops due to freezing temperatures in the winter months, Khashchuluun said. Lack of infrastructure is holding back economic development across the economy, he said.

To contact the reporters on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net;

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

Source:Bloomberg news wire service

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LSE Partners with Mongolia Stock Exchange. Major Boost for MSE and Real Coup for LSE.

LSE signs strategic partnership with the Mongolian Government. The London Stock Exchange Group ("LSE") and the Mongolian State Property Committee ("SPC") have signed an exclusive Strategic Partnership Agreement to restructure and develop the Mongolian Stock Exchange ("MSE"), according to the joint press release made public yesterday. In our view, this is an important milestone in the development of the Mongolian securities market with long term positive impact.  According to the agreement, LSE will appoint a management team to oversee MSE development and privatization, and will provide trading and surveillance infrastructure. The MSE is expected to go through a comprehensive reform and upgrade as LSE plans to be involved from advisory and training on capital markets infrastructure and legislative framework, modernisation of market rules and operations to expansion of tradable asset classes (derivatives and ETFs) and introduction of "international standard Mongolian market index".

 

Win-win partnership. In our view, both LSE and MSE will benefit from this partnership. Under LSE management, MSE should become an effective source of capital for Mongolia companies and widen opportunities for local and international investors with expected IPOs and increased market size. At the same time, with its expertise and technology, LSE will gain access to the resource-rich frontier market and should be able to compete effectively with large regional stock exchanges such as the Hong Kong Stock Exchange (HKEx), especially for international IPOs and dual listings of major Mongolian state-owned enterprises (SOEs), most importantly Erdenes Tavan Tolgoi. We view that this partnership increases LSE's chances to become a strategic shareholder when the Mongolia government proceeds with the MSE privatization.

 

MSE to continue global outperformance. We believe the partnership with LSE will help MSE to become one of the best performing stock markets in 2011 and beyond, following its impressive performance in 2010. Such outperformance over the next several years would be based on the expectation that LSE would be able to assist in unlocking the huge potential of the Mongolia capital markets - valuation rerating, boost in liquidity, improvement in corporate governance, stronger pipeline of IPOs and equity offerings as well as dual listings by international listed companies with operations in Mongolia. Major IPOs by the Mongolian SOEs and large private sector companies coupled with possible dual listings by Mongolia-focused international listed companies with their current US$33bn in market capitalization may catapult the Mongolia Stock Exchange into one of the largest frontier markets globally in the next 4-5 years.

 

In our view, this partnership should accelerate the process of MSE becoming a viable source of capital for Mongolian companies and an efficient channel for wealth distribution from mineral resources among Mongolian population.  Over the longer term, LSE may assist MSE to become a regional hub for capital raising by resource companies, attracting listings from neighboring countries. We expect Mongolia to emerge firmly on the map of international investors and join the MSCI frontier market index, perhaps as early as this year.  We reiterate our key recommendation for investors to gain exposure to the Mongolian local equities as Mongolia is still in the early stage of its 2010-2020 period of the world beating economic growth.

 

Source: Euroasia Capital

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Dalanzadgad Business Centre to develop local supplier capability

The first of three Business Development Centres announced earlier this year is nearing completion and is expected to open in January 2011.

The Centre, opening in Southgobi’s regional capital of Dalanzadgad, will provide invaluable support and skills development to prospective local suppliers, including smaller start-up businesses.

Each Centre will work closely with the Oyu Tolgoi Procurement department to develop and strengthen local business potential and train businesses to understand international standards in procurement practices, for instance, responding to a tender.

Each Centre will consult with local businesses to identify work areas and skills they could focus on and develop in order to supply to Oyu Tolgoi in the future. It will also advise on internal training needs and access to finance such as gaining micro-credit loans.

Not only will the Business Development Centres play a large role in building local supply capability, but local suppliers have featured significantly in the development of the Dalanzadgad centre:

Izmone LLC: main construction contractor is sub-contracting to many smaller construction companies in

Dalanzadgad town.

Khachig Khairkan LLC: supplying and installing all windows for the centre.

Dayanbaigal LLC: renovation work to existing structures.

Govi Gurvan Saikhan LLC: construction work on the structure that will house the boiler.

 In addition to these local suppliers the town electricity, water and waste companies will also do all of these works for the centre. Plans are underway for the construction of the next Business Development Centre in Khanbogd town in 2011.

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Big Money Flowing Into Mongolian Mining Sector

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Oyu Tolgoi holds Supplier Recognition Awards 2010 ceremony Best Mongolian suppliers awarded

Ulaanbaatar, Mongolia – Oyu Tolgoi LLC, Mongolian mining company, held its annual Supplier recognition awards for the second time today to promote Best supplier companies, contractors and individuals who are working together with the Company to build the world-scale Oyu Tolgoi copper-gold complex.

Since 2000, the number of Mongolian supplier companies and contractors has been increasing constantly and as of today there are 2420 companies and individuals registered in Oyu Tolgoi’s preferred supplier list. We expect this will grow during the construction phase and Oyu Tolgoi stays open to all interested parties who wish to cooperate with us in supplying international standard goods and services.

Keith Marshall, President and CEO of Oyu Tolgoi LLC, marked in his opening speech “From January 01, 2010 through September 30, 2010, Oyu Tolgoi signed 345 contracts with Mongolian companies valuing 272 billion tugriks. In addition, Mongolian companies filled 1182 purchase orders totaling 84.1 billion tugriks and accounting for 80% of the total purchase orders for the period.”

Many of the contracts include major site development and construction work, including:

* Steel structure and concrete work at the future copper-gold concentrator

* Construction of employee and contractor camps

* Installation of two new concrete-producing batch plants, including Mongolia’s largest with a daily capacity of 200 cubic meters

* Foundational work related to the construction of the Shaft #2 Headframe

* Installation of diesel power generation station

* Earthworks at the future open pit mine

* Light vehicle leasing and maintenance

* Operation and maintenance of site utilities

* Construction of 4,500-bed camp and facilities

* Employee secondment and personnel service

* Operation and maintenance of fuel distribution and storage facilities

* Charter flight services

* Site security services

* Engineering services

* Local transportation

* Information Technology and communications services

14 companies were awarded out of more than 130 permanent contractors and suppliers based on their safety, sustainability, employee training, quality and on-time delivery performances.

* Best developing supplier (Khanbogd) – Ulziit Munkh Ovoo LLC (Sewing of uniforms)

* Best developing supplier (Umnugobi) – Dayanbaigal LLC (Construction)

* Best small enterprise supplier – Nomgon gol LLC (Industrial products, electrical cables and consumables)

* Best medium enterprise supplier – Batseer LLC (Automotive and maintenance parts)

* Best regional supplier – Erdenet carpet factory (Carpet making)

* Best large enterprise supplier (Ulaanbaatar) – MCS Electronics LLC (Computer IT equipments)

* Best off site services supplier – Geomandal LLC (Camp and Ger producer)

* Strongest improvement in safety culture – Barilga corporation (Construction company and over 200,000 hours LTI free)

* Strongest commitment to employee training – Mongolian-Korean Technical College (Working with Wagner Asia Mongolia LLC on training)

* Best social contribution – Dary Solntsa and Tsogt Orshikhui LLC (Sewing of uniforms in ger districts)

* Most innovative supplier – RUC Mongolia LLC (Raise bore)

* Best delivery in full on time – Izmone LLC (Architect & Construction)

* Best consultancy – Agriteam LLC (Agricultural consultancy)

* Grand prix Best supplier 2010 – Ulziit Munkh Ovoo LLC (Sewing of uniforms)

ABOUT OYU TOLGOI LLC (www.ot.mn)

Oyu Tolgoi LLC is constructing and will operate the Oyu Tolgoi copper-gold project in southern Mongolia, which will be Mongolia’s largest copper and gold mine. Oyu Tolgoi is scheduled to begin commercial production in 2013. Oyu Tolgoi is a strategic partnership between the Government of Mongolia, which owns 34%, Ivanhoe Mines, which owns 66%, and Rio Tinto.

Oyu Tolgoi is committed to implementing best-practice environmental management, applying modern extraction and processing technology and ensuring the health and safety of its employees. The company works closely with local populations in contributing to the development of sustainable communities and preserving customs and cultural heritage.

Oyu Tolgoi currently employs 3503 Mongolian employees and has 2420 Mongolian suppliers on its preferred supplier list.

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Yitai Coal, Mongolian Mining Plan Hong Kong IPOs

Inner Mongolia Yitai Coal Co. and Mongolian Mining Corp. are planning initial public offerings in Hong Kong, becoming the latest coal miners to choose the southern Chinese city as the market of choice for raising capital.

Yitai Coal, based in China's Inner Mongolia, plans to raise $1 billion to $2 billion in an IPO ahead of a listing in Hong Kong in the fourth quarter. Mongolian Mining, a coking-coal producer formerly known as Energy Resources, is looking to raise around $700 million ahead of a Hong Kong listing Oct. 5, according to a term sheet. Mongolian Mining's IPO will be the first in Hong Kong by a company based in Mongolia.

The listings highlight China's ever-increasing energy needs. Coal mines in Mongolia and Inner Mongolia are keen to expand their production capacity by taking advantage of China's growing coal consumption. China was a net exporter of coal until last year, when rising domestic demand -- coupled with the start of a major overhaul of mines in the key production hub of Shanxi province in northern China -- prompted it to scour the Asia-Pacific region for available coal supply.

Yitai Coal has said it hopes the IPO will help fund its planned acquisition of 8.45 billion yuan ($1.24 billion) in coal assets from parent company Inner Mongolia Yitai Group. The number of new shares it plans to issue would amount to at least 15% of its enlarged share capital. The company's assets totaled 23.12 billion yuan at the end of March.

Mongolian Mining plans to list about 20% of its enlarged share capital before an overallotment option of around 15% of the deal size is exercised, according to the term sheet.

Landlocked Mongolia's largely untapped mineral and energy resources have been generating a lot of interest from investors. Mongolia's proximity to China, a major customer for its iron ore, copper, coal and other commodities, adds to its appeal.

Mongolian Mining's Ukhaa Khudag mine is roughly 152 miles 245 kilometers from the Chinese border. The company intended to build a private railway linking the mine directly to the Chinese border, but those designs have been put on hold amid plans by the Mongolian government to build a railway link to Sainshand and connect with the Trans-Mongolian Railway. In the absence of an extensive network of railways, many Mongolian mining sites currently truck resources to China.

Citigroup Inc. and J.P. Morgan Chase & Co. are bookrunners on the Mongolian Mining deal. UBS AG, BOC International Holdings Ltd., China International Capital Corp. and BNP Paribas SA are handling the Yitai Coal deal, the people said.

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Mongolian Mining to raise $700m via Hong Kong IPO

HONG KONG (Reuters) - 

Mongolian coking coal producer Mongolian Mining Corp (formerly Energy Resources) plans to raise about $700 million through an initial public offering on the Hong Kong stock exchange, according a term sheet obtained by Reuters.

Mongolian Mining, which aims to price the offer on Sept. 24, will be the first company listed in Hong Kong to be fully based and operated in Mongolia. The listing is scheduled for Oct. 5.

Citigroup (C.N) and JP Morgan (JPM.N) were joint global coordinators for the offer, the term sheet said.

Global investors are have shown increased interest in Mongolia since it sealed a deal last year with Ivanhoe Mines Ltd (IVN.TO) and Rio Tinto Ltd (RIO.AX)(RIO.L) to develop the $3 billion Oyu Tolgoi mine, one of the world's biggest untapped copper and gold deposits.

Mongolia's domestic companies are seeking foreign capital to help them expand. The Mongolian government is trying to connect local companies and its stock market with the rest of Asia, hoping to turn domestic franchises into regional ones.

Mongolian Mining said it would use the proceeds to buy more mining assets and to build infrastructure. (Reporting by Denny Thomas; Editing by Chris Lewis)

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Mongolia may decide soon on uranium joint venture with Russia

Mongolia may decide soon on uranium joint venture with Russia

15:00 04/05/2010 The government of Mongolia could soon decide on establishing a joint venture with Russia to develop a Mongolian uranium deposit, the head of the Russian civilian nuclear power corporation, Rosatom, said on Tuesday>>

Other news of the day

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Tavan Tolgoi Agreement to be Exhibited to Parliament

Mongolia may soon launch start of Tavan Tolgoi high-grade thermal coking coal mine.

The government, which has taken 100 percent interest of the project through its wholly-owned Erdenes MGL Company, agreed to submit draft investment agreement of Tavan Tolgoi with potential strategic investors to National Security Council headed by the President Ts.Elbegdorj for recommendations.

The National Security Council, which also consists of Speaker of Parliament D.Demberel and Prime Minister S.Batbold, is expected to discuss the draft investment agreement in the nearest days and release recommendations to set in the agreement.

More than ten international businesses have expressed their interests in developing Tavan Tolgoi project. But the government has yet to name winner which will sign trilateral agreement with Government and Erdenes MGL.

The government intends to speed up signing of the agreement and secure as much participation of local Mongolian businesses as possible, and to make more value added products rather than exporting unprocessed minerals.

In order to sign the investment agreement with 19 chapters and 143 articles, the Parliament need to amend current effective Mineral Law, government spokesperson said.
Those interested parties are as following:

•    A consortium of Vale (Brazil), Jindal Steal and Power (India), and eleven other South Korean companies
•    A consortium of Bazovoy Element (Russia) and Renovo (Russia)
•    A consortium of Peabody Energy (USA) and Shenhua Energy (China)
•    A consortium of Mitsiu (Japan), Itochu (Japan), Marubeni (Japan), and Sumitomo (Japan)
•    Xstrata (Switzerland-Australia)
•    Russian Railway (Russia)
•    Erdos Chinglon Coal (China)

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Energy Resources Mulls London IPO, Shareholder Says

Feb. 23 (Bloomberg) -- Energy Resources LLC, a closely held coking coal producer in Mongolia, is considering an initial public offering in Hong Kong or London, the majority shareholder said.
“It’s just an idea at the moment, but we are looking to raise funds and an overseas listing is a good way to raise the profile of the company,” Gankhuyag Adilbish, managing director of MCS Holding LLC, said in a phone interview. No bankers have been hired yet, Adilbish said.

Energy Resources may more than double coking coal production this year as global demand for the steelmaking ingredient increases with the economic recovery. SouthGobi Energy Resources Ltd., which mines coal in Mongolia, raised $394 million in Hong Kong last month in a secondary listing.

Energy Resources “knows the ability to raise money domestically is limited so it needs to look abroad to raise funds,” said Masa Igata, chief executive officer of Frontier Securities which advises investors on Mongolia. “After SouthGobi’s listing in Hong Kong, it should be easier for Mongolian companies to list overseas as their profile has been raised.”

Energy Resources may need “at least several hundred million dollars” as part of a plan to raise annual production to 10 million metric tons in a few years, Igata said. Adilbish declined to comment on how much the company is seeking to raise in the possible share sale.
 

Expansion Plan

The Mongolian company operates one pit at Ukhaa Khudag in the south of the country, which produced about 1.8 million tons of coking coal last year, Financial Director Baterdene Gansukh said in an interview. Output may rise to as much as 4 million tons this year, he said.

Macquarie Bank Ltd. raised its global estimate for 2010 coking coal demand to 244 million tons from 225 million tons in November. BHP Billiton Ltd., the world’s largest mining company, is probably asking Japanese steelmakers to pay $240 a ton for coking coal, UBS AG said Feb. 18. Annual contract prices were set at about $129 a ton for the year ending March 31.
 

MCS, described as a Mongolian private consulting company on Energy Resources Web site, owns more than half of the miner, Gansukh said, without giving specific details. Other shareholders include the European Bank for Reconstruction and Development which invested up to $30 million last year.

Mongolian Resources

Mongolia is seeking $25 billion in overseas investments over five years to develop its metal and coal resources.

The government is considering creating national companies for each commodity such as copper and gold that would then sell shares to global investors, Prime Minister Sukhbaatar Batbold said in an interview this month.

Mongolia is also seeking to develop the $2 billion Tavan Tolgoi coal deposit. Among the companies which have expressed an interest in developing Tavan Tolgoi are Peabody Energy Corp. and China Shenhua Energy Co. the nation’s biggest coal company, Batbold said.

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Battle for Khan

Russian and Chinese state companies are competing in quest for uranium resources in Mongolia. Mongolia’s two superpower neighbours, Russia and China, are eyeing huge uranium resources in the Central Asian nation to meet growing demand and maintain geopolitical supremacy. Russia, the world’s fifth largest uranium producer and holder of the world’s third largest uranium reserves, signed an agreement in May last year with Mongolia on establishing a joint venture to develop Mongolia’s uranium deposits. Almost in half year time in December 2009, Russia’s state-owned AtomRedMetZoloto (ARMZ), the world’s fifth largest uranium producing company, made a hostile bid to acquire Khan Resources, a Canadian company that holds a 58% stake in the Dornod property, the largest uranium deposit in Mongolia. Along with Russian, Chinese companies have also expanded their foreign resource acquisitions to uranium miners in Mongolia. CNNC, China’s state-owned company, acquired a 69% stake in Western Prospector, a Toronto-listed uranium exploration company with assets in Mongolia, for US$25mn on June last year. And the Chinese nuclear company has bid for Khan Resources, the same target for Russian ARMZ.

Khan Resources – a battle between ARMZ and CNNC. Khan entered into a Memorandum of Understanding with the Mongolian Government on January 14 2010, in response to ARMZ’s bid, which Khan believes as “an opportunistic and inadequate offer”. The new non-binding memorandum suggests that MonAtom, the state-owned company, will acquire a 51% in each majority Khan-owned Central Asia Uranium Company (CAUC) and Khan Mongolia in accordance with the Nuclear Energy Law. Along with ARMZ, CNNC agreed on 1 February 2010 to acquire all of Khan’ outstanding common shares for cash consideration of C$0.96 per share, a 48% premium to ARMZ’s bid price. Khan’s management recommended shareholders accepting CNNC’s offer that comes with more favorable conditions than those of ARMZ. In response to the Chinese rival’s bid, ARMZ is expected to announce that it has increased its bid to C$1.01 per share, a 5.2% premium to the CNNC’s offer price, Associate Press reported yesterday.

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2010-02-08 - 06:17:00 - =DJ UPDATE: Mongolia PM: Tavan Tolgoi Ownership Must Remain With Govt

ULAANBAATAR, Mongolia (Dow Jones)--Mongolian Prime Minister Sukhbaatar Batbold said Monday ownership of key deposits other than Tavan Tolgoi, a huge coking coal deposit, would be decided on a "case by case basis."

Last week, people familiar with the situation said the government was likely to back out of a plan to sell a 49% stake in Tavan Tolgoi, opting for mining contracts or production-sharing arrangements.

Speaking to reporters at the first Mongolia Economic Forum, Batbold said he favors keeping Tavan Tolgoi under 100% government ownership.

Besides Tavan Tolgoi, mineral-rich Mongolia has numerous other deposits that can be developed.

"Contract mining is widely used in the U.S. and Australia, so this should be useful to Mongolia. We must see how we can create favorable conditions for foreign investment," he said.

The prime minister, who came into office in October last year, said his recommendation on Tavan Tolgoi was still under discussion.

"A task force must still study the proposal and then make a recommendation to Parliament for endorsement."

The government's plan to sell a stake in Tavan Tolgoi had attracted bidders such as companies such as BHP Billiton Ltd. (BHP), Brazil's Vale SA (VALE), Peabody Energy Corp. (BTU), India's Jindal Group and China Shenhua Energy Co.(1088.HK).

The Tavan Tolgoi mining deposit, located in Mongolia's South Gobi desert, has estimated coking coal reserves of 6.5 billion metric tons and was originally developed with government funding.

Mongolia has some of the world's largest untapped reserves of coal, copper and other commodities.

Lawmakers are targeting US$10 billion-US$15 billion in new mining investment in the next five years, Ch. Khurelbaatar, a government member of parliament and head of Mongolia's standing committee on finance and budget, said late last year.

Interest in Mongolian mining assets has piqued the interest of potential investors since the government signed a landmark deal last year with Canada-based Ivanhoe Mines Ltd. to develop the US$4 billion Oyu Tolgoi mine project.

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