SouthGobi Energy 1878

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DJ SouthGobi Gets HK Listing OK For US$300 Mln IPO -Source

HONG KONG (Dow Jones)--Canadian company SouthGobi Energy Resources Ltd. (SGQRF), a unit of Ivanhoe Mines Ltd. (IVN), has received Hong Kong listing approval for its planned US$300 million initial public offering, a person familiar with the situation said Friday.

China's US$300 billion sovereign wealth fund China Investment Corp. invested US$500 million in the company in October and is expected to also take part in the IPO.

SouthGobi, which mines coal in Mongolia's South Gobi region as well as in East Kalimantan in Indonesia, will start pre-marketing for the deal as early as the first week of January in the hope of listing at the end of the month, the person said.

Citigroup Inc. (C) and Macquarie Securities Ltd. are bookrunners for the deal, people familiar with the situation said earlier.

Source; Amy Or, Dow Jones Newswires

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SouthGobi in Mongolia push

Listing candidate SouthGobi Energy Resources plans to spend at least US$500 million (HK$3.9 billion) in the next three years to explore for coal and build infrastructure in Mongolia, president Alexander Molyneux said.

The Toronto-listed firm, which has a total market value of US$2 billion, is aiming to raise US$300 million in Hong Kong, according to market sources who added that the application has been approved by the listing committee.

Beijing's sovereign wealth fund China Investment Corporation has plans to invest US$500 million in SouthGobi in the form of convertible bonds.

If all the bonds are converted, CIC will have a 25 percent stake in the energy firm while the stake of parent Ivanhoe Mines will be diluted to 60 percent, from 80 percent, according to Sing Tao Daily, sister publication of The Standard.

SouthGobi's flagship project is the Ovoot Tolgoi coal mine - near Mongolia's border with China- with proven and probable reserves of around 114 million tonnes. Up to 55 percent of the firm's coal output goes to refineries and the rest to power stations, Molyneux told Hong Kong reporters in Mongolia. In the first three quarters of the year, SouthGobi sold 968,000 tonnes of coal.

It aims to increase sales to eight million tonnes in 2012 and 14 million tonnes in 2015, Molyneux said.

To cope with the mainland's rising demand for coal, the firm will build six power plants in Gansu with an annual capacity of 600 megawatts each and one with an annual capacity of 1,000 megawatts by 2025, he added.

SouthGobi will also be involved in infrastructure projects, linking Mongolian railway lines with those of Inner Mongolia and Gansu.

Source: BETH YE, The Standard HK

http://www.thestandard.com.hk/news_deta ... 91221&fc=1

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SouthGobi Energy Resources, a leading Mongolian coal miner, has forecast a net loss of no more than US$135.8 million this year, according to its preliminary listing prospectus.

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SouthGobi May Sell $400 Million Shares in Hong Kong (Update1) By Bei Hu

Jan. 4 (Bloomberg) -- SouthGobi Energy Resources Ltd., a Toronto-listed coal producer, may raise $400 million in a Hong Kong share sale, an e-mail sent to fund managers said.

The Vancouver-based company plans to sell 27 million new shares, or a 16.8 percent stake, in a yet-to-be-decided price range, according to the document. The company may expand the offering to 31.05 million shares, or an 18.8 percent stake, to meet demand.

SouthGobi, one of the largest coal producers in Mongolia, is raising capital to finance exploration, expand and build production plants and infrastructure, the document said. It plans to spend as much as $800 million in the next three years to increase output and supply customers in China, Chief Executive Officer Alexander Molyneux told reporters last month.

Citigroup Inc. and Macquarie Group Ltd. are managing the sale.

China Investment Corp., the nation’s sovereign wealth fund, in November bought $500 million of 30-year senior convertible bonds issued by SouthGobi, according to a draft prospectus posted on the Hong Kong stock exchange’s Web site.

SouthGobi is 79 percent-owned by Ivanhoe Mines Ltd. before the Hong Kong share sale and CIC conversion of the bonds into shares, the prospectus said.

The company, which started to gauge demand for the Hong Kong share sale today, plans to start taking orders from institutions for the IPO from Jan. 11 and the shares will be priced Jan. 22, said the document. The stock will begin trading in Hong Kong on Jan. 29.

Seventy-five percent of the shares to be sold in the Hong Kong offering are initially reserved for international institutions, 15 percent for Canadian investors and 10 percent for Hong Kong individuals, said the document.


Source: Bloomberg

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SouthGobi IPO attracts CIC, Temasek: source by Joseph Chaney

HONG KONG (Reuters) - Canada-listed coal miner SouthGobi Energy Resources has secured Asia's top sovereign wealth funds, China Investment Corp (CIC) and Temasek, as cornerstone investors in its planned $400 million Hong Kong IPO this month, a source told Reuters on Friday.

China's CIC and Singapore's Temasek will each subscribe to $50 million worth of shares, said the source, who has direct knowledge of the deal but declined to be named due to the sensitive nature of the matter.

The presence of the cornerstone investors, who buy shares before a public listing and promise to hold them until a later date, gives another high profile boost to the Mongolia-focused miner.

SouthGobi's IPO follows a $500 million investment from CIC announced in October, which SouthGobi plans to use to expand its Mongolia development.

"What's relevant about it is the quality of the cornerstones," the source said.

"It's a sign that CIC thinks there's more upside, and that Temasek, the cornerstone investor with the best reputation in Asia, has endorsed the strategy."

CIC has been particularly aggressive with investments in the resources sector in recent months. The fund made a number of stake acquisitions last year, including a 14.5 percent stake in commodities firm Noble Group for $850 million, and a 17.2 percent stake in Teck Resources for $1.5 billion.

SEEKING EXPANSION

SouthGobi, which started IPO premarketing on Monday, is focused on expanding its coal production capacity in Mongolia, centered around its Ovoot Tolgoi mine.

Ovoot Tolgoi's production target for 2009 was 1.5 million tonnes and it plans eventually to extract 8 million tonnes of metallurgical and thermal coal a year from Ovoot Tolgoi.

The mine, located just 40 kilometers north of the Mongolia-China border, began selling coal to Chinese buyers in September 2008.

SouthGobi will kick off a marketing road show on January 11, aiming to list on January 29 under the symbol "1878."

Citigroup and Macquarie are handling the IPO.

According to a term sheet obtained earlier by Reuters, 75 percent of the offering will be allocated to institutional investors, 15 percent to Canadian investors and 10 percent to Hong Kong retail investors.

http://www.reuters.com/article/idUSTRE6071ZB20100108

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Not vested.

DJ SouthGobi Energy Seeks Up To US$531 Mln In HK IPO - Source

HONG KONG (Dow Jones)--SouthGobi Energy Resources Ltd. (1878.HK) is seeking to raise up to US$531 million in a Hong Kong initial public offering before listing later this month, a person familiar with the situation said Monday.

In the base deal, SouthGobi, which is the largest coal producer in Mongolia in terms of export sales, is selling 27 million shares at a maximum offering price of HK$133.5 a share, or C$17 each, to raise US$462 million, the person said. The company has an option to increase the size of the deal by 15% to raise a total US$531 million, the person added.

China's sovereign wealth fund, China Investment Corp., and Singapore's Temasek Holdings Pte. Ltd. have each pledged to subscribe to US$50 million worth of shares in the IPO, the person said.

In November, CIC invested US$500 million in 30-year debentures convertible to SouthGobi shares that would give it a 30.3% stake in the company, according to SouthGobi's preliminary prospectus posted on the Hong Kong stock exchange. The debentures can be converted into SouthGobi shares at C$11.88, it said.

Citigroup Inc. (C) and Macquarie Securities Ltd. are joint bookrunners of the deal, the person said.

Source: Amy Or, Dow Jones Newswires

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by millionairemind » Fri Jan 15, 2010 8:45 am

Published January 15, 2010

CIC, Temasek to buy SouthGobi Energy shares in IPO

(HONG KONG) China Investment Corp (CIC), the nation's sovereign wealth fund, and Temasek Holdings Pte will buy shares in SouthGobi Energy Resources Ltd's initial public offering (IPO) in Hong Kong.

CIC and the Singapore investment company will each invest US$50 million in the share sale, CEO Alexander Molyneux said on a video link from London at a press briefing here yesterday.

SouthGobi, the Vancouver-based coal producer operating in the southern deserts of Mongolia, may raise as much as HK$3 billion (S$537 million) in the share sale, according to a statement released by the company at the briefing. CIC has spent more than US$4 billion on energy and resources investments since last September to hedge against inflation and meet the needs of the world's fasting-growing major economy.

'I don't think you can get better cornerstone investors in an IPO than CIC and Temasek,' said Alisher Djumanov, managing partner at Singapore-based Eurasia Capital Management, which has about US$100 million in investments in Mongolia and Central Asia.

'I think both have recognised the potential for developing energy and resources in Mongolia.'

CIC bought US$500 million of 30-year senior convertible bonds issued by SouthGobi last year. Other energy investments made by the sovereign wealth fund include US$400 million worth of shares in China Longyuan Power Group Corp when the wind-power producer started selling its stock here last month.

SouthGobi started production at its Ovoot Tolgoi mine in the deserts of southern Mongolia last year and aims to use funds raised in the share sale to boost output, improve infrastructure and finance exploration.

The coal producer may spend as much as US$800 million in the next three years to increase output and supply customers in China, Mr Molyneux told reporters on Dec 10.

The company is controlled by Vancouver-based Ivanhoe Mines Ltd. Chairman Robert Friedland said last October that the underdeveloped resources of Mongolia could make the north Asian country 'the Saudi Arabia of coal'.

SouthGobi may have made a loss of US$111 million in 2009, the company said in the statement. The energy supplier will be investing heavily to increase production and has no forecast for when it will start making a profit, Mr Molyneux said yesterday.

SouthGobi's plans may include building a 40-kilometre railway track from the Ovoot Tolgoi mine to the border with China. Coal is now trucked to the border by rail and road links.

Ovoot Tolgoi produced 1.2 million tonnes of coal last year and SouthGobi plans to increase this to 8 million tonnes annually by 2012 to supply customers in China, Mr Molyneux said last month.

Mr Friedland said last October that Ivanhoe, through SouthGobi, wants to supply one per cent of China's coal needs within 10 years and is targeting long-term production of 20 million tonnes annually from Mongolia. Rio Tinto Group has a 19.7 per cent stake in Ivanhoe.

SouthGobi's stock will begin trading in Hong Kong on Jan 29. Shares will be priced at a maximum of HK$133.50 each, the company said in the statement.

Source: Bloomberg

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From Phillips:-


Competitive Strength

- Projects are located close to China, especially to the fast growing Gansu and Inner Mongolia regions
- Substantial and growing resources and reserves
- Production of premium quality coals
- Low cost structure due to favorable geographic and geological conditions.


Risk Factors

- Coal reserve and resources are estimated based on number of assumption, and coal production volume may lower than expected

- Licenses and permits are subjected to renewal and various uncertainties and the company may only renew their exploration licenses a limited number of times and for limited period of time.

- Concentration risk of business environment.


Valuation

Compared with other HK listed peers, China Shenhua <1088.HK>, China Coal <1898.HK>, and Yanzhou Coal <1171.HK>, they are now trading at 4.25x, 2.68x and 2.89x times 2010 PB respectively. We set 2010 BVPS and PB of South Gobi Energy Resources Ltd <1878.HK> to be HK$38.19 and 3.65x respectively.

Our 12-month target price is HK$ 139.4, implying 4.41% upside potential of high-end of the indicative price range. As the company is expected to record earning this year, there are still high uncertainties for the earning level; and rating is speculative subscribe.

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The retail tranche of Canada's SouthGobi Energy Resources was about 84 percent covered, as seven brokerages received margin financing orders worth HK$301 million as of yesterday.

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From Phillips:-
We set 2010 BVPS and PB of South Gobi Energy Resources Ltd <1878.HK> to be HK$38.19 and 3.65x respectively. Our 12-month target price is HK$ 139.4, implying[b] 4.41% upside potential of high-end of the indicative price

Have to decide by tonight on whether to apply or not.

Valuation is not cheap. Market direction is weak.

So why would someone want to apply for this IPO ?