Mongolia shortlists 4 banks for massive coal IPO

Thu Feb 24, 2011 6:11am GMT

* Four banks shortlisted for Tavan Tolgoi IPO

* IPO, Mongolia's largest, planned for H1 2012

* Mongolia set to overtake Australia as China's top coking coal supplier

By David Stanway

ULAN BATOR, Feb 24 (Reuters) - Mongolia has shortlisted BNP Paribas , Deutsche Bank , Goldman Sachs and Macquarie Group to manage the initial public offering (IPO) of Erdenes-Tavan Tolgoi, the world's largest untapped coking coal deposit.

The IPO, which will be Mongolia's biggest, is planned for first half of 2012, Mining Minister Dashdorj Zorigt told reporters on Thursday.

The size of the IPO is still unclear with bankers estimating the offer to be in the range of $1.5-$5 billion. It has attracted huge interest from global banks to win the coveted mandate, with some 150 bankers converging on the frozen capital of Ulan Bator earlier this week to pitch for the deal.

The Mongolian government plans to distribute shares in the company free to all citizens and another chunk to Mongolian corporations, according to officials, bankers and analysts working on the transaction.

Mongolia plans to keep 50 percent of state-owned holding company Erdenes-Tavan Tolgoi, which controls the deposit, located in the South Gobi desert near China's northern border.

The resource rich country, which lingered in isolation for 70 years as a Soviet satellite state, serving as a sleepy buffer zone between its giant neighbours, Russia and China.

Now the democratic government, in power since the early 1990s, is trying to pull its 3 million citizens out of poverty by exploiting its largely untapped mineral wealth.

Mongolia exported 16.6 million tonnes of coal to China in 2010, up nearly three-fold from the preceding year and just 2.5 million tonnes in 2005.

The country, expected by some analysts to be one of the fastest growing economies of the next decade, is poised to overtake Australia to become China's largest coking coal supplier this year. (Writing Denny Thomas; Editing by Lincoln Feast, sourced:Thomson Reuters)

Tags:Mongolian Government, Russia, China, Australia, raw material

Miners push European shares to 29-mth closing high

17:50, Monday 14 February 2011

* FTSEurofirst 300 (E3X.FGI - news) up 0.3 pct

* Commodity (COMIN.NX - news) stocks gain on China import data

* Banks (SBK.NX - news) lower ahead of sector results

LONDON, Feb 14 (Reuters) - European shares hit a 29-month closing high on Monday, with miners up after Chinese trade data highlighted strong demand for raw material and as talk of easing inflation in the country capped fears of further tightening.

The pan-European FTSEurofirst 300 index of top shares closed 0.3 percent higher at 1,177.86 points, its highest close since early September 2008.

The index, up 3 percent this month, has rebounded almost 83 percent since hitting a record low in March 2009.

Miners in the STOXX Europe 600 basic resources index rose 1.6 percent as copper prices neared record highs after data showed a fall in China's trade surplus to a nine-month low, following surprisingly strong imports, notably of copper.

"The import data reaffirms the growth story in China and helps to give confidence in mining companies that interest rate rises are not going to suppress metal demand in the medium term," said Joshua Raymond, market strategist at City Index.

Traders also said there was talk China's consumer price index (CPI (Berlin: CEJ.BE - news) ) may have risen 4.9 percent in the year to January, well below the forecast of 5.3 percent, adding that might be because of weighting changes in the CPI.

"Inflation has been the major worry and there has been a fear of monetary overkill, but until the (inflation) data is released (on Tuesday) we could see a bit of volatility," said Heino Ruland, strategist at Ruland Research in Frankfurt.

Share (LSE: SHRE.L - news) price gains were kept in check by falls in heavyweight banking stocks ahead of sector earnings results due this week. Societe Generale (Paris: FR0000130809 - news) and BNP Paribas (BNPQF.PK - news) , which report this week, both shed around 1.2 percent while Lloyds Banking Group fell 1.7 percent.

Bucking the trend, Credit Suisse (CSMA - news) gained 1.9 percent after the Swiss bank said it will issue 6 billion Swiss francs ($6.2 billion) of contingent convertible capital bonds, or CoCos, to satisfy stricter capital rules. [ID:nLDE71D039]

ARM Holdings (LSE: ARM.L - news) rose 6.6 percent as traders cited bullish notes from Goldman Sachs (NYSE: GS - news) and Morgan Stanley (DWDF.EX - news) on its outlook. Nearly all the world's mobile phones and tablets use the company's low-power technology.

France's Thales (Hamburg: CSF.HM - news) rebounded from earlier losses to rise 4.6 percent, as investors brushed aside a profit warning from the defence company. [ID:nLDE71D0BM]

Cementing expectations of a pick-up in merger and acquisition activity, British energy services provider John Wood Group surged 13.9 percent after U.S. conglomerate General Electric bought a unit of the company for $2.8 billion.

(Reporting by Joanne Frearson;Editing by David Hulmes,sourced:resuters)

Tags:FTSEurofirst, Commodities, European market, shares, Chinease trade data, strong demand, raw materials, STOXX Europe, traders, Credit Suisse, ARM Holdings, Goldman Sachs Group Inc.,Thales, John Wood group, General Electric.

Japanese Steel Takeover Driven by `Radical' Shift as Costs Rise

Feb 4, 2011 2:12 PM GMT+0530
By Masumi Suga and Rebecca Keenan

Nippon Steel Corp. and Sumitomo Metal Industries Ltd.’s plan to create the world’s second-largest steelmaker is aimed at gaining leverage over raw-material purchases and metal pricing as costs soar. Shares in both companies surged the most in more than two years today.

Based on Sumitomo’s market value and net debt, the deal would be worth more than 2 trillion yen ($24.5 billion), according to data compiled by Bloomberg. Yesterday’s announcement of the accord, which may be Japan’s biggest non- bank takeover, said it would be completed by October 2012.

Steelmakers in Japan, the world’s second-biggest producer of the alloy, are seeing profits squeezed while market-leader China encourages consolidation to create globally competitive companies. Rising costs for iron ore and coking coal used to make steel forced Nippon Steel to cut its full-year earnings forecast last week. Sumitomo Metal did the same today.

“The purpose of this merger is to fend off competition from rivals in China, South Korea and India,” said Takashi Murata, an analyst at Daiwa Securities Capital Markets Co. in Tokyo. A bigger company has more clout to negotiate raw-material costs and set steel prices for buyers including automakers, he said.

Share Reaction

Sumitomo Metal Industries rose 16 percent to 224 yen at the close of trading in Tokyo for the biggest advance since Oct. 30, 2008. Nippon Steel ended at 313 yen, up 9.1 percent, after rising as much as 14.3 percent, the most since Oct. 28, 2008.

Before today, Nippon Steel shares had fallen 16 percent in the past year, compared with a 3.2 percent decline for Luxembourg-based ArcelorMittal and a 17 percent drop for South Korea’s Posco, the world’s third-biggest producer. Sumitomo Metal had fallen 26 percent in the year before today.

The proposed merger between Sumitomo Metal Industries and Nippon Steel will create synergies for both companies as well as benefit “the wider steel industry by helping to increase pricing and margins,” Goldman Sachs Group Inc. analysts Rajeev Das and Nana Hasegawa said in a report today.

The merger is positive for Nippon Steel because of benefits arising from the combined size of the two companies, Standard & Poor’s said today in a statement.

‘Radical Change’

A combination of the two producers, which haven’t outlined terms of the transaction, would form the world’s second-largest steelmaker, based on output of 47.8 million metric tons in 2010, Sumitomo Metal Industries President Hiroshi Tomono said at a press briefing yesterday. ArcelorMittal is the biggest producer.

“We see a radical change in the business environment surrounding the Japanese steel industry,” Muneoka told reporters at the briefing.

Nippon Steel, formerly the world’s second-largest steelmaker by production, lost that rank in 2009 after being overtaken by five Chinese mills, according to the American Institute for International Steel.

Meantime, rivals are expanding, with South Korea’s Posco on Jan. 31 winning approval for a $12 billion steel plant in India, the biggest single foreign investment in the country.

“It’s very important Japanese steelmakers be globally competitive,” said Japanese Economy Minister Kaoru Yosano today. The planned merger of Nippon Steel and Sumitomo Metal Industries is “welcomed” he said.

Steel Demand

Steel consumption may rise 5.3 percent this year to a record, according to World Steel Association forecasts. Iron ore prices rose last year after Rio Tinto Group, BHP Billiton Ltd. and Vale SA, the biggest suppliers, shifted away from annual pricing to quarterly agreements.

The price of iron ore will be 21 percent higher on average this year, Credit Suisse Group AG said in a Jan. 7 report. The spot price of ore delivered to China including freight will average $178 a ton, the report forecast. That compares with $147 in 2010, according to The Steel Index.

Floods in Australia’s Queensland state closed mines and further pushed up coking-coal prices. Free-on-board prices may surge to $400 a ton for the three-month contract starting April 1, from $225 this quarter, Bank of America Merrill Lynch said last month.

“It’s all about lowering costs and enhancing margins,” Gavin Wendt, a senior resources analyst at Mine Life Pty in Sydney, said by phone. “While demand for steel is quite strong, one of the problems for steelmakers around the world is rising costs. It may give them more leverage when it comes to dealing with the miners.”
(sourced: bloomberg.com)