Mongolia hopes to leverage widespread international interest in its Tavan Tolgoi coal mine to diversify its economy.
Mongolia has repeatedly insisted that it wants to open its doors for business to all countries with a genuine interest in participating in the country’s sustainable growth. How much of this policy is lip service though and how fair is the bidding process for prospective foreign investors? Mongolia’s long awaited initial public offering (IPO) for its lucrative coal mine in Tavan Tolgoi will have to wait at least until 2013 according to recent remarks by government officials. The repeated delay of one of Mongolia’s signature markets is sending mixed signals to foreign investors and has the potential to erode investor confidence in the resource-rich Central Asian country.
Tavan Tolgoi represents one of Mongolia’s most important chips to foreign investors as the company controls an area that is believed to contain the world’s largest undeveloped coking-coal deposit. The mine is situated in Mongolia’s southern Gobi desert which has made it an appealing location for Chinese investors. In July 2011, China’s Shenhua Group was awarded a 40% stake in the mine. The remaining investment contracts were awarded to a Russian-Mongolian consortium (36%) and American mining company Peabody (24%). It was believed that this trilateral group would jointly develop the mine, but government officials in Ulan Bator demurred on their decision after Japanese and South Korean companies began protesting that the bidding process had been unfair.
The uncertainty has created a five-chair shuffle in which East Asia’s largest power brokers are competing to have a lasting economic footprint in Mongolia. Mongolian President Tsakhia Elbegdorj has cautioned that the contract for developing the mine is not a done deal after rejecting a previous decision to hand the majority of the mining rights to the Chinese-backed consortium. Elbegdorj insisted that it is “essential that it (developing the mine) is in line with policies and in line with our national security. We have two big neighbors and we need investment. I think the door is still open in the negotiations with big national investors.”
The underperforming price of coal in the financial markets is pushing the IPO deeper into 2013 as investors wait for an opportune time to establish a market presence. The Tavan Tolgoi IPO, which is expected to be offered at U.S. $3 billion, has also been pushed back due to legal constraints involved in listing Tavan in three international markets – London, Hong Kong and Ulan Bator. Reports of the delayed IPO come amid frustrations with Hong Kong’s increasingly complicated legal frameworks and restrictions. Mongolian officials are working to amend their legal securities framework to allow the IPO to list on all three markets.
Photo Credit: Wikicommons
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amar
John Chan with his high education and brainwashed mouth is definitely a member of CCP. Cant be much lower. Wow, i had a real pleasure reading these debates. I regret i couldnt join earlier and co-debate to put Chan on his place. Now i have much better understanding of what our Southern neighbors think of us…
Hulan
Yes, I really enjoyed people taking Mongolia into a global context and actively discussing it. There are some very powerful points in the debate, but I honestly doubt that what John Chan thinks is the majority opinion in the country. After all, the policies put forward by the government can not reflect everyone's opinion. In terms of Mongolia, Their policy is to keep a balance and diversity in the countries investing in it. It does not have a bias to China or the West. To the Mongolian eyes, they will always be countries pursuing their own national interests. Only Mongolia truly cares about their land and safety and we know that. That is why these investment procedures should be dealt with the utmost care. I personally think Elbegdorj's pursuit to diversify the economy in terms of both sector and region is the wise and only effective choice for the future of Mongolian economy. And mining is damaging the land, but it is the milestone for Mongolia until we are able to process them in a market level standard for export. I truly have much hope for the potential development of Mongolia and taking into account the existing International law and china's recognition of Mongolia as a sovereign state, China can not swallow Mongolia, but they can damage them through their economic advantages.
Erdene
Chinese invasion or digestion of Mongolia is highly unlikely and will be so until unimaginable events occur in international politics or nature of the world. Some people, as their opinion suggest me that they from China, commenting to follow their misunderstanding of real history of the countries would tarnish its Chinese government of building good image in abroad. It seems to possibly image that if there are majority of the Chinese people holding this mispreposition, there will be great danger to world peace.I hope people who had forgotten their ancestors’ grief and sorrow from the worst war in their history will not be allowed to participate in any decision making in China. For peace
agii
welcome to Mongolia,
Noel Worthy
Why was it built, and where is the Great Wall of China? Lets see, the GWoC was built to keep out the"Barbarians', in other words, Non-Chinese people and also to protect the Chinese land. So, all land NORTH of the GWoC was in fact at that time, not China….heck the Qin recognized that, that's why they built it! So those of you, the CCP you who keep on about how Mongolia(both most of Inner and Outer ) were always part of China in its history are wrong. Why would a country build a wall through the middle of its OWN land? Now for the CCP looking after the lands in Inner Mongolia…what a joke John Chan, you said that the West is digging up and destroying land in Mongolia, that may be true,,but SO are Chinese companies. In Inner Mongolia ( and i have been there three times) the CCP run Chinese companies are doing exactly that, destroying the grass lands whole scale! They use the excuse that the herders are destroying the land ( even though the herders have been there for thousands of years, looked after the land) the CCP blamed them, only so they could then force the herder off their land, and then in they come to RAPE the land. I guess you don't understand how much damage a coal truck and mine does to a grassland V a herder who always rotates his stock to avoid damage as they HAD done for so many thousands of years, but in the last 15 years…well
Errol
You mean the Gobi Desert will expand? I knew Beijing gets lost of dust because of its proximity to the desert, but wouldn't that mean that Beijing will get more?