Mongolian Mining Corp to buy out HK firm in Baruun Naran coal mine for $464.5 million
02 June 2011
Mongolian Mining Corporation (MMC), the country's biggest coking coal exporter, agreed to buy the Baruun Naran mine in Mongolia from Hong Kong-based QGX Holdings, for $464.5 million, the biggest acquisition by a Mongolian mining company to date.
QGX is 90 per cent owned indirectly by Kerry Mining (Mongolia) and 10 per cent by MCS Minerals.
The Baruun Naran Coking coal mine is located within the Tavan Tolgoi coalfields in the South Gobi Desert in Southern Mongolia. It is the largest undeveloped metallurgical and thermal coal deposit in Asia.
The mine holds 253 million tonnes of measured and indicated coal resources and 193 million tonnes of potential mineable coal.
The acquisition will add to MMC's existing reserves of 286 million tonnes and 500 million tonnes of resources.
Ulaanbaatar-based MMC will pay $379.5 million in cash and $85 million by issue of convertible bonds with an 18-month maturity to QGX. The deal size may exceed $464.5 million to $950 million provided that the probable reserves are confirmed within 18 months following the deal, said MMC.
Kerry Mining had purchased the mine in 2008 for $259 million.
MMC is a high-quality coking coal producer and exporter in Mongolia. It owns and operates an open-pit Ukhaa Khudag coking coal mine located within the Tavan Tolgoi coal formation in South Gobi, Mongolia, 240 km north to the Chinese border.
MMC is the closest coking coal producer to Baotou, the closest railway transportation hub providing access from Mongolia to the largest steel producing provinces in China.
Commenting on the acquisition, Odjargal Jambaljamts, chairman of MMC, said:
"The acquisition provides the group with a unique opportunity to purchase a coking coal asset strategically located adjacent to the UHG deposit with pre-feasibility study / in advanced development stage. The asset will allow the group to expand its existing footprint in Mongolia and realise its growth via acquisition strategy."