Mongolia Energy mulls takeover of weaker rivals
Updated: 2009-04-16 07:09
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HONG KONG: Coal miner Mongolia Energy Corp, which transformed itself from a technology company to a mining firm in 2007, is considering possible takeover of weaker rivals amid the global financial crisis.
"It's a perfect time to be out looking for projects," Chief Executive Officer James Schaeffer told Reuters in an interview.
"Those that have invested in the Philippines, Indonesia and Australia are thinking: 'Maybe we shouldn't have done that'," he said.
"There are quite a few things on the market. If the opportunities come up, we could look at those," he added.
Mongolia Energy, which is set to begin its mining operations by the middle of this year, plans to produce 3 million tonnes of coal a year in 2010, raising it to 8 million per annum by 2012.
Schaeffer declined to give a profit forecast, but said the company will see an improvement in cashflows in 2010 from the production of coal.
The company reported late last year a loss of HK$185.6 million in the six months ended September 2008, compared with a profit of HK$4.4 million in the same period a year before, due to accounting losses related to its energy projects.
Coal mines in China are grappling with weaker prices as slackening industrial activity in the country crimps demand for the fuel. Coking coal prices have fallen about 60 percent in the spot market from a peak of $715 a tonne last year.
But Schaeffer said he believes prices for coking coal, a key raw material used to make steel, have stabilized.
Steel makers slashed global output by 24 percent in the last quarter of 2008.
Mongolia Energy, which is active in western Mongolia, said it will not be affected by the government's move to reform its minerals law and said it has full government support for its projects.
A deal on the development of the giant Oyu Tolgoi copper project - being developed by Ivanhoe Mines and Rio Tinto - has been held up after the government sought to raise its stake in strategic deposits to 50 percent or higher.
Mongolia sits on about 2 percent of the world's uranium reserves. The country is revising its minerals law to set the new terms for state revenues and participation in mining projects.
The current law gives the state either a 34 percent stake or a controlling 51 percent stake in mining projects.
"If we had been in South Gobi, we would be mixed up in all the politics regardless of what you're doing - it's guilt by association," Schaeffer said.
Shares in Mongolia Energy have been largely flat this year, up 0.4 percent, underperforming a 35 percent rise in shares of bigger rival Shenhua Energy and an 8.3 percent increase in the benchmark Hang Seng Index.
Reuters
(HK Edition 04/16/2009 page16)