Mongolia seeks investors for Sainshand industrial complex

Mongolia is seeking investors for a USD10-billion
industrial complex that will meet rising Asian demand for coal and copper from
some of the world’s largest untapped mineral resources. A copper smelter, oil
refinery, power plants and chemical coking facilities are planned at Sainshand
in the Gobi desert to do value-added processing for the Tavan Tolgoi coking
coal deposit and Oyu Tolgoi copper mine, . Ch.Ganbat, a government adviser and
former Wall Street financier with Commerzbank AG., has told Bloomberg.

The Mongolian
government wants investors to fund as much as 40 percent of the project that
will build 1,000-kilometers of railroads through south Gobi and eastern
Mongolia, connecting Tavan Tolgoi to China and Russia. “Mongolia can become the
Kuwait of central Asia,” Ganbat said. “All the resources are there, and all the
buyers are there. The only missing part is to get everybody organized, prepare
all the documentation that meets international practice. It’s doable.”

Mongolia is seeking investors as part of a national
development strategy that aims to grow its economy by 14 percent between 2007
and 2015, bringing gross domestic product per capita for the nation’s 2.7
million people to USD5,000 from the current USD1,900. That would raise GDP per
capita to above the level of countries including Thailand, Maldives, and China,
assuming the same growth rate for other Asian nations, according to Ganbat, adviser to the Ministry of Road,
Transportation, Construction and Urban Development of Mongolia.

Mongolia
targets another 12 percent economic growth from 2016 to 2021, and GDP per
capita of USD12,000, surpassing Malaysia, and putting it in the same league as
South Korea and Taiwan. The World Bank estimated the value of Mongolia’s GDP in
2008 was just USD5.3 billion. Mongolia is rated B1 by Moody’s Investors
Service, four levels below investment grade and on par with Fiji and Papua New
Guinea. Standard & Poor’s rates the nation BB-, the third-highest
non-investment ranking.

Mongolia
plans to fund 60 percent to 70 percent of the project through debt financing,
and seeks foreign and local equity sponsors, including private equity, pension
funds and institutional investors for the remaining 30 percent to 40 percent,
according to Ganbat. About 40 percent of the funds will finance the
infrastructure part of the plan, and the rest will be used for industrial
facilities.

Mongolia
is seeking bids from engineering and construction companies to do “master
planning” for the industrial complex and railroads as the project’s management
consultants, he said. A tender notice will be published by June 25, and final
proposals are due by July 30. Selection of the project manager will be
completed by August 20.

If
the project’s master plan, expected to be completed by April 2011, proves to be
economically viable, the government wants to start construction in the second
half of next year, Ganbat said. Building
will take two to three years, with production estimated to begin in 2014,
starting to generate economic benefits from 2017, he said.

Apart
from saving the Mongolian economy from the risk of being overly dependent on
mining and subject to fluctuations in commodity prices, the industrialization
also will create about 78,000 jobs between 2010 and 2021, according to Ganbat.
Foreign workers will be needed at the initial stage.