Source: The Wall Street Journal, Bloomberg                   Date: 03 June, 2011

Mongolia Mining Corp. has agreed to buy coking-coal miner QGX Coal Ltd. for USD464 million, marking the largest acquisition by a Mongolian company of another company in the country. Hong Kong property-and-hotels conglomerate Kerry Group, among the holdings of tycoon Robert Kuok, bought 90% of QGX in 2008 for USD259 million. Kerry owns 8.1% of MMC, which late last year became the first Mongolian company to list its shares in Hong Kong.

MMC will pay a Kerry unit USD379 million in cash and the rest through a USD85 million MMC convertible loan that expires in 18 months. If in 18 months the reserve calculation of the QGX mine exceeds 150 million tons of coking coal, MMC will pay Kerry an added USD105 million in cash. If not, the value of the convertible bond will be reduced. Depending on reserve calculations and including royalty payments, Kerry could be paid a maximum of USD950 million. UBS AG advised Kerry on the sale, while Citigroup Inc. advised MMC.

QGX owns the Baruun Naran Coking Coal Project in southern Mongolia and has 282 million tons of resources and 185 million tons of reserves. MMC, which has properties near the QGX site, owns and operates an open-pit Ukhaa Khudag coking-coal mine located in the Tavan Tolgoi coal formation in South Gobi, Mongolia. MMC holds 500 million tons of resources and 286 million tons of reserves.

“The sizable coking coal resources and reserves estimated in the Baruun Naran coking coal mine will open potential to diversify the group’s coal products and enhance sources of revenue,” Mongolian Mining said. The company will also be able to share mine and transport infrastructure. “Demand for coking coal will continue to grow and the acquisition enables the group to further expand its coking coal mining business and to solidify the company’s position as the leading coking coal miner in Mongolia,” the statement said.