Green Global Resources, which recently bought an iron ore mine in Mongolia, sees the recent strained relations between China and Australia as an opportunity to seek more opportunities on the mainland.
'The proximity between China and Mongolia means a much shorter time for transport and flexibility for customers,' said chairman Michael Tse Nam.
He added that the quality of ore from the Mongolian mine, which the company bought for HK$1.76 billion last month, was comparable to Australia's and he was confident of grabbing a share of the market when production started.
Transit time from Mongolia to the mainland varies from one to two days by rail, compared with 10 to 35 days from Australia and 34 to 43 days from Brazil by sea.
Australia exported 183.36 million tonnes of ore and Brazil 100.62 million tonnes to the mainland last year, while Mongolia only exported 1.01 million tonnes.
However, there are vast amounts of resources that remain untapped.
Mr Tse said the acquisition of a 90 per cent stake in Golden Pogada, which holds the exploration licence to an iron ore mine of 1,201 hectares in Oyut Ovoo, was just the first step in Green Global's transformation into a resources play. Green Global, which reported a loss of HK$198 million last year, will settle the deal mainly by convertible preferred shares.
It plans to offload its agro-conservation and bio-energy businesses gradually, although it will keep its systems integration business. The Oyut Ovoo mine, about 270 kilometres southwest of Mongolia's capital city of Ulan Bator, is an open pit that will be easy to mine, according to Joseph King Jun-chih, chairman of the vendor, Mountain Sky Resources Holdings.
He said the mine, 265km from the Trans-Siberian Railway, did not require a lot of infrastructure investment since it was near a highway and had access to electricity and water supplies. He said Golden Pogada was in the process of obtaining the licence from the Mongolian government and was confident it would be granted by the end of the year, which is also one of the conditions for the deal to go ahead.
Mr King declined to give any figures for the potential resources of the mine, saying it was still awaiting independent valuation.
Golden Pogada last week sold a 10 per cent stake to state-owned China Railway Resources, which will be responsible for all the logistics and transport arrangements for the Oyut Ovoo mine.