ULAN BATOR, July 27 Mongolia's state-owned miner
Erdenes Tavan Tolgoi (TT) has agreed to sell $250 million worth
of coal from the east Tsankhi deposit to Aluminium Corp of China
Ltd (Chalco) , a move insiders said was aimed at
raising cash to help fund its impending listing fees.
Under the agreement, Chalco would resell 30
percent of the coal to Japanese trading houses Itochu Corp
and Mitsui as well as state-owned Korea
Resources Corp (KORES), Erdenes TT LLC said in a statement seen
Erdenes TT said a signing ceremony was attended by China's
ambassador to Mongolia and delegates from Chalco. It has also
signed purchasing agreements with Itochu, Mitsui and Kores.
The government has split the massive Tavan Tolgoi coal field
into two sections for development. The east Tsankhi area is
owned by Erdenes TT, which is planning an initial public
offering worth as estimated $10 billion, while the west Tsankhi
block is being auctioned to miners via an international tender.
A source involved in the listing of Erdenes TT said the
government has been working hard to raise $500 million of
initial funding needed to kick off the IPO process.
"The overall capex for the project is well into the billions
over the life of the mine so $500 million is just a drop in the
bucket to get this project moving," said the source who asked
not to be identified as his firm was still competing to win
deals related to the IPO.
Erdenes TT did not say how much coal would be sold to Chalco
under the $250 million deal, but it said the agreement would
expire within one to 1-1/2 years. However, a newspaper report
quoted B. Enebish, head of state-run Erdenes MGL, as saying the
deal would last for five years.
After the deal expires, Chalco would then have to pay market
price for the coal, Erdenes TT said. But it was unclear whether
Chalco would continue to be the sole recipient of the coal from
east Tsankhi deposit when the agreement expires.
Erdenes TT could not be reached for comment.
The government has said that it hopes to list Erdenes TT by
late 2011 or early 2012, and the company would likely be listed
in London, Hong Kong, or both.
Land-locked Mongolia, which has an gross domestic product of
just about $6 billion, is banking on the development of its
massive coal and copper resources to lift the nation out of
poverty and help fund much-needed infrastructure projects across
(Reporting by Khaliun Bayartsogt, additional reporting by David
Stanway in Beijing; Writing by Fayen Wong; Editing by Jonathan
Hopfner and Ken Wills)