Mining, energy firms aim to raise billions from HK public offerings

PUBLISHED : Monday, 20 September, 2010, 12:00am
UPDATED : Monday, 20 September, 2010, 12:00am

Hong Kong's initial public offering market is set to sizzle this month, with four companies, including Mongolia Mining and Trony Solar, aiming to raise a combined HK$15.3 billion.

Mongolia Mining, which mines coking coal in the landlocked nation and sells to the world's biggest steel industry in China, is aiming to raise around US$700 million to fund capacity and infrastructure expansion, people familiar with the deal said.

The firm operates the Ukhaa Khudag mine about 245 kilometres from the Mongolian-Chinese border. It is located within the Tavan Tolgoi coal region, one of the world's few unexploited major sources of coking coal.

It plans to expand output from 3.8 million tonnes this year to 7 million tonnes next year, 10 million tonnes in 2012 and 15 million tonnes in 2013.

It has proven and probable reserves of 286 million tonnes. Including possible reserves, total resources amount to 500 million tonnes, according to a JP Morgan research report. JP Morgan and Citi are the deal's joint bookrunners.

Despite rising domestic coking coal production, faster growth in demand means that a supply deficit of 28 million tonnes last year is forecast to rise to 44 million tonnes by 2015, according to consultancy Wood Mackenzie.

Mongolia Mining is expected to be the first Mongolian-controlled-and-run mining company from the country to list in Hong Kong. The company is 57.2 per cent-owned by MCS Group, Mongolia's biggest private conglomerate with interests in property, mining and brewing.

Two of the nation's biggest diesel procurers, Petrovis and Shunkhlai, have a combined 20.2 per cent stake, while the European Bank for Reconstruction and Development has 5 per cent. The bank has provided US$180 million in loans to Mongolia Mining.

Kerry Group, whose subsidiary SCMP Group publishes the South China Morning Post, owns 10 per cent, while private equity firm Ancora Capital has 7.6 per cent. Mongolia Mining plans to spend US$351 million to build three coal-washing plants with 5 million tonnes of annual capacity each, the first of which is due to come on stream in next year's first quarter and the second one in the third quarter.

JP Morgan forecast its washed coal could fetch US$143 a tonne next year, compared to US$70 this year for its unwashed product. Its customers include Hebei province-based Shougang and Hebei Iron and Steel, Inner Mongolia's Baogang as well as Jiangsu's Shagang.

Mongolia Mining also plans to spend US$104 million to build a paved road alongside an existing gravel road to cut transport costs by a quarter to US$16 a tonne next year. It also plans to build a US$699 million 30 million tonne-a-year private railway to connect to the Chinese rail system by 2013 to further reduce transport costs to US$3 a tonne.

Meanwhile, Trony Solar, a Shenzhen-based producer of thin-film - or amorphous silicon - solar panels, which withdrew its New York listing plan in December due to unfavourable market conditions, is aiming to raise more than HK$1.8 billion in Hong Kong this month. The joint book runners are JP Morgan, CLSA and ICBC International.

Thin-film solar panels are less efficient than crystalline silicon panels at converting light to electricity but are cheaper to produce on a per-watt generating capacity basis.

Thin-film panels can be deployed in a wide range of products like calculators and building roofs and facades, while crystalline ones are mainly used to generate electricity for power grids. Over 90 per cent of Trony's sales are to the off-power-grid market.

Due to a shorter commercialisation history, thin-film only accounted for 13 per cent of global solar panel production in 2008, but is forecast to grow on average 36 per cent annually until 2013 compared to 17 per cent of crystalline ones, according to industry consultancy Solarbuzz. This could see thin-film panel's market share rise to 24 per cent by 2013.

Trony was the mainland's largest and the world's fourth-largest producer of thin-film solar panels last year, and its production costs are the second-lowest in the world after United States-based First Solar, according to a JP Morgan research report.

Trony plans to raise output capacity from 145 megawatts in March last year to 205 MW in this year's fourth quarter and 265 MW next year.

Revenue has grown at an annual average of around 120 per cent in the past three years, with gross profit margin of around 40 per cent.

Separately, SITC International, the third-largest mainland-based container shipping firm by last year's shipping capacity, is aiming to raise up to HK$4.1 billion through an initial public offering. Citi and China International Capital are the joint book runners.

Focusing solely on the Intra-Asia trade market, it posted a net profit of US$51.1 million in this year's first-half, up from US$8.55 million a year earlier. Net profit fell to US$32.5 million last year, down 8.4 per cent from 2008.

Winsway Coking Coal, a coking coal washing and logistics services provider, is aiming to raise just over US$500 million from a listing in Hong Kong to acquire coal resources and add logistics infrastructure, people familiar with the deal said.

Untapped reserves

Mongolia Mining is raising money in Hong Kong to fund expansion

The amount, in US dollars per tonne, JP Morgan forecasts Mongolia Mining could get for washed coal next year is: $143