Source: OilPrice.com                     Date: 09 June, 2011

Due some time in the next 12 months, an energy IPO offering in Mongolia already has foreign investors salivating. The darling of the international energy community is coal company Erdenes-Tavan Tolgoi ("Five Hills") Ltd., popularly known as TT, which has yet to begin operations. What is TT bringing to the market that has caused such interest? It is a massive deposit located in the east Tsankhi area of the Gobi desert and estimated to hold over 6.4 billion metric tons of coking coal, the world's biggest untapped deposit of its kind.

Mongolia’s government is currently selecting an operator for the massive deposit and the choice is expected to be a large, experienced foreign mining company. Heightening investor interest was a successful public offering last fall in the autumn of 2010 by Mongolian Mining Corp., Mongolia's largest privately held domestic producer and exporter of coking coal, whose Ukhaa Khudag mine is within the Tavan Tolgoi coal formation in the southern Gobi. Mongolian Mining Corp.’s IPO was floated on the Hong Kong Stock Exchange and raised USD651 million. In contrast, analysts are predicting that the TT IPO could raise as much as USD10 billion.

What makes the TT IPO unique is that the Mongolian Government has just given each citizen 538 shares in the Erdenes-Tavan Tolgoi IPO. If the IPO hits its anticipated USD10 billion, each Mongolian’s shares would be worth about USD360. The government stock giveaway totaled 1.5 billion shares, equal to 10% of TT and reserved another 1.5 billion TT shares for thousands of Mongolian business enterprises. Besides the 20 percent handed out to local enterprises and citizens, the government aims to retain 50 percent of TT, with the remaining 30 percent to be listed on an overseas stock exchange.

The TT stock giveaway is an integral part of a governmental effort to convince its citizens that its decision to pursue large-scale mining in Mongolia will have a direct bearing on their well-being, following several earlier contentious mining deals.

Even Russia has gotten into the act. Earlier this month, Russian President Dmitrii Medvedev, commenting on rising bilateral trade possibilities, said, “We need new powerful projects such as nuclear projects or Tavan Tolgoi, which will promote bilateral cooperation.”