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Zimbabwe-linked firm plans HK stock offering

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In what may be the most optimistic Hong Kong initial public offering plan by an international firm so far, Lontoh Coal, a South African miner whose main project is in heavily sanctioned Zimbabwe, is planning a US$300 million to US$500 million share sale.

'We are planning an IPO on the Hong Kong stock exchange in the first half of 2011,' Tshebo Kgadima, Lontoh's chief executive, told the South China Morning Post. 'We are looking to raise US$300 million to US$500 million. Our advisers say the company is worth up to US$1.5 billion.'

Australian bank Macquarie's Johannesburg office was advising Lontoh on its fund-raising options, a spokesman there confirmed.

While Lontoh is headquartered in Sandton, South Africa, its largest asset by far is the Lubimbi mine in Zimbabwe, which Kgadima said had 400 million tonnes of proven thermal and coking coal 'reserves', a term that describes commodities that can be mined economically. Lontoh's asset base in its native South Africa is much smaller, with 50 million tonnes of proven coal reserves.

Kgadima admitted he had partly chosen Hong Kong as a listing venue because it might have been difficult for his company to sell shares in New York or London.

The United States forbids trade or investment with Zimbabwean companies connected to the country's controversial president, Robert Mugabe. So mutual funds based anywhere in the world with a US shareholder or parent cannot easily invest in those companies either.

Lontoh is not on America's list of sanctioned Zimbabwe companies. But Kgadima said that could be difficult to explain to Western investors. 'It is easier for us to look towards Asia than the North American or some European markets.'

Diplomatic relations between Beijing and Harare are warm, though, meaning Lontoh has a chance of selling shares to a mainland wealth fund.

The Mugabe family has also made Hong Kong their second home. Mugabe's daughter Bona is studying accountancy at City University of Hong Kong and the family owns a house in Tai Po.

When Mugabe's wife Grace allegedly hit British photographer and long-term Hong Kong resident Richard Jones as he snapped her shopping in Hong Kong last January, she was granted diplomatic immunity and escaped assault charges.

Mugabe's policies, particularly the seizure of white-owned farms, have deterred investment in Zimbabwe. But some global investors are warming to the resource-rich nation.

In September 2008, following an election marred by fraud and violence, Mugabe's Zanu PF party forged a power-sharing deal with opposition leader Morgan Tsvangirai's Movement for Democratic Change. The coalition has been uneasy, with both sides still squabbling over a new constitution.

But last year, the country began tackling its rampant inflation by switching its currency to the South African rand and the US dollar.

Last month, British billionaire Richard Branson urged people to invest in ethical Zimbabwean businesses to help the impoverished nation - which has 90 per cent unemployment - recover.

Charlie Awdry, who runs British investment house Gartmore's China Opportunities Fund, said: 'We are used to meeting companies who invest and operate in Zimbabwe.'

Lontoh would be the first African company to list on the Hong Kong exchange, which is on a marketing drive to attract more international firms.

Russian aluminium giant Rusal raised HK$16.8 billion in a Hong Kong IPO in January.

Five more non-Chinese firms, including French cosmetics retailer L'Occitane and Mongolia-focused miner SouthGobi Energy Resources, have sold shares here since then.

Solid assets

Lontoh says its Lubimbi mine in Zimbabwe has proven thermal and coking coal reserves of, in tonnes: 400m

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