Mongolia’s plan
to privatize its state-owned assets will allow international investors access
to some of the world’s largest untapped mineral resources through initial
public share sales, most likely in Hong Kong. Dulam Sugar, chairman of the
Government of Mongolia’s State Property Committee, said even though the
procedure of equity listings hasn’t been confirmed, the Mongolian government
has decided to sell shares in both local and international stock markets.

Sugar named
Erdenet Mining Corp., a Mongolian-Russian copper producer joint venture, the
Tavantolgoi coking coal deposit and the Oyutolgoi copper mine as the nation’s
biggest state-owned assets to be privatized. Uranium companies may also be privatized.

“Mongolia
doesn’t have anybody who has offered shares in international markets yet,
that’s why we are very cautious,” Sugar said in an interview to Bloomberg. “We
are asking international investors to invest now, particularly those from Hong
Kong.”

The Mongolian
government is in the process of identifying state-owned enterprises to be
privatized, the chairman said. McKinsey & Co. is advising the government,
which expects final results in one month, he said.

Erdenet,
established by the governments of Mongolia and the former Soviet Union,
produces more than 530,000 tons of copper concentrate and 3,000 tons of
molybdenum concentrates. It also processes 25 million tons of ore per year.
Tavantolgoi holds about 6 billion metric tons of coal, making it one of the
world’s largest unexploited reserves of the fuel. While it is 100 percent
government-owned, Mongolia plans to control part of the deposit by a state-run
enterprise, with a second tranche to be operated by a group of foreign and
domestic companies, Sugar said. Rio Tinto Group and Ivanhoe Mines Ltd. are
developing Oyutolgoi, which has been called the world’s largest copper
resource.

Selling part of
its holdings in these assets will require the agreement of Mongolia’s joint
venture partners, Sugar said. The average daily turnover of the Mongolian stock
exchange is about USD100,000 this year, according to Kh. Altai, chief operating
officer of the Mongolian Stock Exchange. That compares with HK$64 billion in
Hong Kong.