Mongolian Mining Corp. and its shareholders will raise as much as HK$5.28 billion ($680 million) in a Hong Kong initial public offering to fund rising production and build a railway line to transport coal.
Mongolia’s biggest private coking coal miner and investors are selling 20 percent of the company, or 719.4 million shares at between HK$6.29 and HK$7.34 apiece, according to a term sheet sent to investors.
The company is seeking to boost mine production more than eight times through 2013, construct Mongolia’s first coal-wash plant and build paved roads and a railway to the China border to lower transportation costs, according to a report by JPMorgan Chase & Co., which is managing the sale with Citigroup Inc.
Mongolian Mining is based in the Tavan Tolgoi area, south of Ulaanbaatar and about 240 kilometers (149 miles) from the border with China.
The company and customer Winsway Coking Coal Holdings Ltd., which processes and transports coal from Mongolia into China, will both start taking orders for IPO shares today. China, the world’s biggest steelmaking nation, last year increased imports of coking coal fivefold to a record as the government closed smaller unsafe mines.
Mongolian Mining will likely post profit of $68 million this year, and net income may jump to $260 million in 2011, JPMorgan estimates.
SouthGobi Resources Ltd., the Canada-listed company backed by China’s sovereign wealth fund, trades at 11.2 times consensus forecasts for 2012 profit, JPMorgan said in its research report. Mongolian Mining should trade at a premium because it mainly produces hard coking coal, while South Gobi focuses on semi-soft coking and thermal coals, according to JPMorgan.
Mongolian Mining is expected to start trading in Hong Kong on Oct. 13, the sale document said.
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