Shenhua in US$7b coal bid
Source: Agencies |
July 6, 2011, Wednesday
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Print Edition
Print Edition
A VENTURE led by China Shenhua Energy Co will hold a 40 percent stake in the western Tsankhi block of Mongolia's Tavan Tolgoi coal project, giving Shenhua the biggest share of one of the world's biggest coking coal deposit.
A Russian-led consortium would control 36 percent of the project, while US miner Peabody Energy Corp would own the remaining 24 percent, according to a draft proposal to be submitted to the Mongolian parliament today, the Mogolian government said in a statement.
"This is a big win for Shenhua and will give a significant boost to its long-term growth prospects," said Helen Lau, a senior commodities analyst with UOB-Kay Hian in Hong Kong.
The project, which may require initial investment of more than US$7 billion, is seen as vital to kick-start the land-locked nation's economy. It will also generate billions of dollars in revenue for the companies involved and add tens of millions of tons of increasingly rare coking coal used by steel makers.
China, Japan and South Korea are snapping up iron ore and coking coal mines globally to diversify from heavyweight suppliers such as BHP Billiton and Rio Tinto.
The focus has shifted to undeveloped Mongolia, which some analysts say could be one of the fastest-growing economies of the next decade because of its vast quantities of untapped mineral wealth.
Lau said Hong Kong-listed Winsway Coking Coal Holdings, which has a joint venture with Peabody in China, would also benefit from more coal transportation to China.
As part of the Mongolian government's proposal, the companies will make a US$1 billion payment to it, including a non-refundable US$500 million. The Tavan Tolgoi coal deposit, in Mongolia's southern Gobi region, has estimated reserves of 6 billion tons of coal, including the world's largest untapped deposit of steel-making coking coal.
The western Tsankhi block holds around 1.2 billion tons of reserves, 65 percent of which is coking coal. It has an estimated production life of more than 30 years at 15 million tons a year.
The government also plans an up to US$5 billion initial public offering for Erdenes-Tavan Tolgoi, the state-owned company in charge of the eastern Tsankhi block. Goldman Sachs and other top banks have been short-listed to manage the IPO.
A Russian-led consortium would control 36 percent of the project, while US miner Peabody Energy Corp would own the remaining 24 percent, according to a draft proposal to be submitted to the Mongolian parliament today, the Mogolian government said in a statement.
"This is a big win for Shenhua and will give a significant boost to its long-term growth prospects," said Helen Lau, a senior commodities analyst with UOB-Kay Hian in Hong Kong.
The project, which may require initial investment of more than US$7 billion, is seen as vital to kick-start the land-locked nation's economy. It will also generate billions of dollars in revenue for the companies involved and add tens of millions of tons of increasingly rare coking coal used by steel makers.
China, Japan and South Korea are snapping up iron ore and coking coal mines globally to diversify from heavyweight suppliers such as BHP Billiton and Rio Tinto.
The focus has shifted to undeveloped Mongolia, which some analysts say could be one of the fastest-growing economies of the next decade because of its vast quantities of untapped mineral wealth.
Lau said Hong Kong-listed Winsway Coking Coal Holdings, which has a joint venture with Peabody in China, would also benefit from more coal transportation to China.
As part of the Mongolian government's proposal, the companies will make a US$1 billion payment to it, including a non-refundable US$500 million. The Tavan Tolgoi coal deposit, in Mongolia's southern Gobi region, has estimated reserves of 6 billion tons of coal, including the world's largest untapped deposit of steel-making coking coal.
The western Tsankhi block holds around 1.2 billion tons of reserves, 65 percent of which is coking coal. It has an estimated production life of more than 30 years at 15 million tons a year.
The government also plans an up to US$5 billion initial public offering for Erdenes-Tavan Tolgoi, the state-owned company in charge of the eastern Tsankhi block. Goldman Sachs and other top banks have been short-listed to manage the IPO.
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