China Investment Corporation (CIC), the state-owned sovereign wealth fund has agreed to invest $500 million in Canadian coal company SouthGobi Energy Resources for a 15 per cent stake in the miner's Mongolian coal projects.
SouthGobi Energy Resources is a subsidiary of Vancouver, Canada-based Ivanhoe Mines, which operates the Oyu Tolgoi copper-gold mining complex in Mongolia in a joint venture with mining giant Rio Tinto.
SouthGobi Energy Resources is exploring and developing permian-age metallurgical and thermal coal deposits in Mongolia's South Gobi Region. The company's flagship coal mine, Ovoot Tolgoi, is producing and selling coal to China and plans to supply a wide range of coal products and electricity to markets in Asia.
CIC will buy a 30-year debenture that gives a return of 8 per cent per annum and will be convertible after one year into a total of 22 per cent of the common shares in SouthGobi Energy Resources.
While the debenture loan is outstanding, or while CIC has a minimum 15 per cent stake in SouthGobi, CIC has the right to nominate one director with non voting rights to SouthGobi's board.
CIC will have the right of first offer for any direct and indirect sale of Ivanhoe Mines' ownership stake in SouthGobi. Ivanhoe Mines currently holds 79.13 per cent stake in SouthGobi.