Miner SouthGobi may tap HK market for US$800m
Another overseas mining company eyes Mongolian assets
SouthGobi Energy Resources, a Canadian-listed mining company that owns mines in Mongolia, plans to raise as much as US$800 million from a secondary share offering in Hong Kong later this year at the earliest.
UBS had been hired to arrange the share sale, sources said, adding that the lower end of the range of the deal could be US$500 million.
A spokesman at Vancouver-based SouthGobi declined to comment.
More overseas mining companies with assets in Asia have been looking at raising funds in Hong Kong to access investors familiar with the region, particularly China, with its demand for natural resources to fuel economic growth.
The Hong Kong stock exchange's strong liquidity and growing number of mining analysts in the city were also a draw.
'Companies are looking to Hong Kong because they see the market as more exciting with more liquidity and more trading. Canada is not so excited about these types of companies,' said one natural resources banker.
Some market players disagreed, saying that traditional venues such as London, Toronto and Australia were still the best option for capital because of their more sophisticated mining specialist investor base and greater analyst depth.
Sino Gold Mining, an Australia-listed miner whose main assets are in China, raised HK$892.5 million from a secondary offering in Hong Kong in March last year.
Its Hong Kong shares have fallen 16.14 per cent this year, to HK$40 yesterday, compared with their listing price of HK$42.50.
SouthGobi trades on Toronto's TSX Venture Exchange, a board designed for start-up companies that do not meet the listing requirements yet for the city's main stock exchange.
The company has a market capitalisation of C$1.75 billion (HK$13.37 billion), with its shares up 48.89 per cent this year.
Ivanhoe Mines, another Canadian mining company active in Mongolia, holds an 80 per cent stake in SouthGobi. CFE (Capital Markets), a company indirectly owned by Cheung Kong (Holdings) and Canadian Imperial Bank of Commerce, paid C$6.4 million for a less than 1 per cent stake in SouthGobi in February.
SouthGobi is developing the Ovoot Tolgoi coal project 45km north of the border with China, where the company intends to sell the coal it mines.
The company in March said it received a mining permit from the Mongolian government. It was the last approval required before development could begin, the company said in a statement filed with the stock exchange.
The first coal shipments from the open pit mine are expected in the third quarter.
The mine contains about 150 million tonnes of coal but might hold an additional 29 million tonnes.
The company also runs a minerals unit, which is looking for gold and copper in Mongolia and Indonesia.
In China, SouthGobi is involved in the delayed Oyu Tolgoi project, a gold and copper mine about 80km from the Chinese border. That project is being jointly developed by Ivanhoe and Rio Tinto, the third-largest mining company in the world.
The lower end of the range in the offering could be, in US$: $500m