No IPO for Erdenes-Tavan Tolgoi in 2013

The giant Mongolian coking coal deposit will not list this year due to financial difficulties, according to its chief executive of development.

Speaking to Reuters, Batsuur Yichil, the head of the state-owned firm controlling the project said  “E-TT (Erdenes Tavan Tolgoi) is facing ... financial difficulties. That's why we stopped our coal transportation and export,” He then added that the government would provide assistance to help the firm repay its debts.

Along with the copper and gold mine Oyu Tolgoi, the 7.5 billion ton coking coal deposit has been a key factor in Mongolia’s recent headline grabbing growth figures. Mongolia was planning to list the eastern section this year however, Batsuur confirmed yesterday that these plans have been suspended.

Batsuur cited poor market conditions as another reason to delay the listing process. “We have decided to wait until the market recovers, the price of coal increases and until E-TT starts regular construction of its wash plant. Plus, we need to increase our exports”

It also emerged that E-TT are trying to renegotiate the cost of sales deal with Chinese state owned Chalco, after the project was forced to suspend shipments to China this month due to high transportation costs.

The Mongolian government has pledged to provide a $355 million loan to E-TT, which he said might be used to help it exit an agreement to supply to China.

E-TT main creditor Chalco, is owed $180 million by the project as part of a supply contract signed in 2011. Within the terms was an agreement that E-TT could pay the $250 million lent to them by Chalco in coal or cash.

The mine’s financial troubles stem from the government’s pledge to issue each Mongolian citizen with 1,072  shares in the mine in an effort to allow the public to participate in the mining wealth. 

Last year, amid numerous delays in listing and a fast approaching election, the government initiated a buyback scheme in which citizens could trade their shares for MNT 1 million ($760).

In a country where per capita income is around $3,000, the buyback program saddled the government with a $1 billion bill, at a time when E-TT itself was unlisted and barely breaking even. In an effort to recoup the losses the government forced E-TT to front most of the cost.

As well as negotiating with Chalco, E-TT is in discussions with the government of Mongolia over a sizeable loan, which would ensure that the mine is able to continue its development.