Steel giant ArcelorMittal (MT) is among the six preferred bidders picked to develop Mongolia’s Tavan Tolgoi mine, which could grant access to the world’s biggest untapped coking coal deposit.
Tavan Tolgoi, located in Mongolia’s south Gobi region, consists of six coal fields and Tsankhi is the main one, containing most of its coking coal resources. The mine is estimated to contain at least 5 billion metric tons of coal and will give the winning bidder a ready-made export market.
However, an initial investment of about $7.3 billion is required to develop the Tavan Tolgoi mine.
In February, the Mongolian government had announced its intention to distribute roughly half of the shares of Tavan Tolgoi through an initial public offering. The offering may bring foreign investment between $2 to $5 billion.
The Mongolian government plans to sell roughly 30% of Tavan Tolgoi’s shares to international investors, 10% of shares to be distributed equally among the citizens of Mongolia and another 10% to Mongolian businesses. The government will retain the remaining 50% of Tavan Tolgoi’s shares.
Rapid industrialization and strong demand for coking coal from big Asian buyers including China, Japan and South Korea has pushed prices to near record highs this year.
The other preferred bidders are Peabody Energy Corp. (BTU) of the U.S., Brazil’s Vale S.A. (VALE),Xstrata plc, the China-Japan consortium of Mitsui & Co. Ltd. (MITSY) and Shenhua Group.
Currently, ArcelorMittal has a short-term (1 to 3 months) Zacks #3 Rank (Hold) on the stock.
PEABODY ENERGY (BTU): Free Stock Analysis Report
MITSUI (MITSY): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
VALE RIO DO-ADR (VALE): Free Stock Analysis Report
Zacks Investment Research
