Mongolia Considers Selling Stakes of Copper, Coal, Gold Assets

(Bloomberg) -- Mongolia, the Asian nation with some of the world’s largest untapped mineral resources, is considering setting up separate companies owning the country’s gold, copper and coal reserves and using investment banks to sell shares to global investors, the prime minister said.

The country will start the process toward listing this year and plans to sell shares first on the Mongolian Stock Exchange, Prime Minister Sukhbaatar Batbold said in an interview yesterday in Ulan Bator, the capital. Mongolia plans to hire international investment banks to help it sell shares abroad, he said.

“The parliament has given the approval for the government to start the preparation” for the share sales, Batbold said. “This is a demand and a necessity for Mongolia, to make best use of these resources to develop Mongolia.”

The share sales will potentially transform the country’s economy. About one-third of Mongolia’s population of roughly 3 million is classified as poor and herders in western regions face food shortages this year, according to the United Nations. Mongolia is seeking $25 billion in overseas investment over five years to develop metal and coal resources.

“I think it makes sense as long as Mongolia puts sizeable assets into these companies,” said Alisher Djumanov, Beijing-based chief executive officer of Eurasia Capital Management. He estimates the country could raise as much as $3 billion in three years selling equity stakes in resource companies.

Mongolia hasn’t yet decided whether to group all asset classes into three companies, as the Wall Street Journal reported Dec. 10, or to create smaller companies around specific commodities, Batbold said.

State Control

“It would also make it much easier to market these companies if they were only dealing with one resource, such as copper, uranium or coal,” Djumanov said.

Mongolia is seeking to develop the $2 billion Tavan Tolgoi coal deposit and last October signed an agreement with Canada-based Ivanhoe Mines Ltd. and Rio Tinto Group to help develop the $4 billion Oyu Tolgoi copper-gold project starting in 2013. The project, which London-based Rio has called the world’s largest such resource, may operate for as long as 30 years and generate $30 billion to $50 billion in revenue, Mongolian President Tsakhiagiin Elbegdorj said last September.

Earlier yesterday, Batbold said that while he doesn’t rule out foreign ownership of the $2 billion Tavan Tolgoi coal deposit, state ownership is preferred.

“We have not ruled out foreign mining companies having a stake, but our preferred option is complete state control,” Batbold said at a press conference, where he is hosting an investment conference. “Ownership and investment of all the big projects will be decided on a case by case basis.”

Among the companies which have expressed an interest in developing Tavan Tolgoi are Peabody Energy Corp. and China Shenhua Energy Co., Batbold said in the interview. The country’s parliament is due to make a decision on the mine in its session beginning in April, Mining Minister Dashdorj Zorigt said in an interview yesterday.