Hong Kong newspaper stresses Mongolia’s potential from a mining perspective

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Hong Kong newspaper stresses Mongolia’s potential from a mining perspective

Thu, 18 Feb 2010 13:26:09
A Hong Kong newspaper has said that judged from a mining perspective, Australia can be regarded as an elderly person and Indonesia an adult. But Mongolia is just a baby which has yet to grow up to reveal its real potential.
The Standard has singled out two Mongolian companies that are expected to make news in 2010. Toronto-listed SouthGobi Energy Resources’ potential may not be reflected in the stock's 11 percent slide on its first trading day in Hong Kong, but the future holds much promise for this Canadian company, which raised USD439 million from its initial public offering, and which is a strategically located premium coal producer in Mongolia.
Ovoot Tolgoi is SouthGobi's flagship coal mine while Tavan Tolgoi is the world's largest undeveloped coal field. Both are to be connected with road and railway links to China's steel hubs such as Jiayuguan in Gansu and Baotou in Inner Mongolia. Beijing has also approved huge coal-fired plants for Jiuquan near Jiayuguan.
SouthGobi's coal quality is higher than that of Chinese coal producers. The forecast target volume in 2009 and 2010 is around 2 to 3 million tons as SouthGobi negotiates to boost sales. The firm is aiming for a production surge of 15 million tons in 2015. Transport of the coal will be made easier after both the Chinese and Mongolian governments approved three coal corridors across their common border. Transportation has not been a problem yet, since clients have been sending their own trucks to the coal mines to collect supplies daily. One of SouthGobi's strengths is its versatile management team.
The other one mentioned by the newspaper is Mongolia Energy Corporation, which is transforming itself from a single-project coal company to a multi-mineral resources developer. Its management is banking on large scale exports from western Mongolia to the Xinjiang Autonomous Region whose transport infrastructure is to be upgraded. Mongolia Energy has built a 310-kilometer highway to access the Chinese market from its mines and also aims to develop copper mines connected to the coal reserve.
Simon Lo Lin-shing, MEC's largest shareholder, is pushing the company to become a fully fledged resource developer. Its main asset is coal concessions it acquired in 2007. It has also carried out eight drilling projects involving oil and gas, iron and other minerals.
One advantage is that MEC faces weak competition from other firms seeking resources in western Mongolia.