Cabinet seeks dual-listing of Erdenes TT on MSE and foreign exchange
Cabinet has submitted its proposal to launch the IPO of Erdenes Tavan Tolgoi (Erdenes TT), offering 30 percent of the company on the Mongolian Stock Exchange and a foreign stock exchange through a dual-listing.
The proposal to launch the IPO of Erdenes TT was supported by the parliamentary caucus of the ruling Mongolian People’s Party (MPP) and the National Security Council. As such, the final draft bill that will allow the dual-listed IPO was presented to Speaker of Parliament M.Enkhbold by Minister of Mining D.Sumiyabazar.
If approved, Cabinet will launch the IPO of Erdenes TT within 180 days. Officials have stated that after deliberation, dual-listing was seen as the best option.
“Regarding the economization and hastening of Erdenes TT, Cabinet exchanged views with several international stock exchanges and investment banks,” said D.Sumiyabazar.
In terms of choosing the foreign stock exchange, D.Sumiyabazar has said that the Hong Kong, Tokyo, New York, London, and Toronto stock exchanges have sent direct proposals to the government.
Currently, a 40-person joint task force consisting of Erdenes Mongol, Erdenes TT, and Cabinet employees are working to update the feasibility study, the reserve of the mine, in addition to the project preparation for the processing plant, water supply, road system, and railway. A valuation in 2010 put the total value of the Tavan Tolgoi mine at 5.7 billion USD.
Total reserves at the mine total approximately 7.4 billion tons of coal, of which, 5.1 billion tons is coking coal. D.Sumiyabazar said that one of the objectives of the task force was to update the valuation that had been conducted seven years ago.
“There is a perception in society that state-owned enterprises do not operate well. Therefore, we now have the responsibility of showing that the government can be a good manager. President Kh.Battulga, Speaker of Parliament M.Enkhbold, and Prime Minister U.Khurelsukh all have the same viewpoint that Erdenes TT, must be economized quickly,” said D.Sumiyabazar.
“Due to the fact that there is a danger of the stock value plummeting if the IPO is conducted only on a foreign stock exchange, we believe it would be better to dual-list,” added the minister.
The draft bill submitted to Parliament allows up 50 percent of the company to be owned by Mongolian citizens and individuals but also to be traded on a foreign stock exchange. It also includes articles on how Erdenes TT has not been able to implement projects of a processing factory, electric lines, power station, railway, and road system due to its financial constraints.
As such, the draft bill tasks Cabinet with finding solutions to these problems using proceeds from the proposed IPO. The work that will be done with the proceeds includes more broad targets such as increasing the value of coal from Tavan Tolgoi but will also include specific projects such as connecting roads from Tavan Tolgoi mine to Gashuunsukhait, Zuunbayan, and Oyu Tolgoi–Khangi, and Baruunnaran.
But arguably more important for the long-term view of the project, the draft bill specifically mentions the need to begin construction of the railway from the mine to Gashuunsukhait border crossing and Zuunbayan.
The secondary articles of the draft bill include conducting negotiations with Russia and China regarding transit railway, costs, infrastructure development, and investment. In addition, the project to build a Tavan Tolgoi-based power station to provide energy to a plethora of mining projects in the southern Gobi region will be decided, the draft bill states.
On Wednesday’s regular session of Cabinet, it was decided that new routes will be added directly from Tavan Tolgoi to Gashuunsukhait in order to avoid the long border bottlenecks that were persistent from early 2017 up until Prime Minister U.Khurelsukh visited China in April 2018.
However, the problem has not gone away completely as a 39 kilometer queue at the Tavan TolgoiTsagaan Khad road has begun to extend. Meanwhile, the Tsagaan Khad-Gashuunsukhait road has accumulated a logjam of trucks stretching 23 kilometers.