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CAPITAL MARKETS

Mongolia: Politics threaten to delay landmark Tavan Tolgoi IPO

Hong Kong, London, Mongolia exchanges involved; Korea, Japan angry over contract exclusion

Political wrangling in Mongolia is delaying the $2 billion to $3 billion IPO of mining company Erdenes Tavan Tolgoi, according to sources in the country. The deal, which would be Mongolia’s largest ever equity offering, is expected to transform the country’s economy by providing thousands of jobs, revitalizing its stock market, and bringing in billions of dollars of outside investment as well as providing direct economic benefit to citizens in the form of allocations of shares. The government itself is keen to get the deal done before the forthcoming election. However, two pressing political problems are threatening that deadline.

The first problem is where to list the company. The government has insisted from the outset that Erdenes Tavan Tolgoi, which will operate one of the country’s largest coal deposits, list in Mongolia as a means of bringing much-needed liquidity to the country’s moribund exchange. The problem has been in deciding which of two global exchanges, London and Hong Kong, should be included in the deal. Both have been lobbying hard in the months since the deal was announced, with executives from each of them visiting Ulan Bator. London has played up its strengths as a traditional hub for metals and mining companies and its convenient location between the Asian and US time zones, while Hong Kong has focused on its leadership in Asia, proximity to China, and the fact that it has already hosted several successful IPOs of Mongolian companies.

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