Government resolution on Erdenes Tavantolgoi JSC partially revokedSociety
Ulaanbaatar /MONTSAME/ At its irregular meeting on April 27, the Cabinet decided to revoke clause 2 of its resolution No. 296 of 2019 on the measures to be taken in regard with the Erdenes Tavantolgoi JSC.
In 2018, the National Security Council made a recommendation to the Cabinet regarding the measures to speed up the construction of Tavantolgoi-Zuunbayan and Ukhaakhudag-Gashuunsukhait railroads. The recommendation instructs that every possible effort be made to carry out basic infrastructure construction of railroads in the above-mentioned routes and the project financing be obtained through international Initial Public Offering of shares.
Erdenes Tavantolgoi JSC has made profits in 2018 and 2019 and has been investing in the construction of Tavantolgoi-Zuunbayan railroad thus far.
The Cabinet issued its resolution No. 296 of 2019 to boost investment in compliance with the recommendation of the National Security Council and set a goal to carry out initial public offering on stock markets. As the National Security Council recommendation has been evidently misrepresented for political reasons, the Cabinet Secretariat on March 27, 2020 submitted a request to the National Security Council to revoke the clause 2.1 of its recommendation. However, on April 16, 2020, the National Security Council stated in an official note that there are no grounds to make changes to the recommendation.
The Cabinet at its April 27 meeting assigned relevant ministers to work attentively in light of the difficulties that may arise due to the revocation of clause 2 of the resolution No. 296.
Following measures were included in the revoked clause 2 of the Cabinet Resolution No. 296:
Clause 2. Minister of Mining and Heavy Industry D.Sumiyabazar, Minister of Finance Ch.Khurelbaatar, and the Government Agency for Policy Coordination on State Property (A,Ariunbold) are assigned to take the following measures to trade shares of the holder of the special license of Tavan Tolgoi coal deposit on international stock exchanges:
2.1. To establish subsidiaries of Erdenes-Tavantolgoi in order to efficiently raise funds from international markets in the shortest possible time in compliance with relevant laws and international standards and requirements;
2.2. To transfer special licenses held by Erdenes-Tavantolgoi, first of all, special license No, MU-011943 of the East Tsankh deposit, to the company’s subsidiary in order to increase the value of Tavan Tolgoi coal deposit in phases;
2.3. To offer up to 30 percent of the shares of Erdenes-Tavantolgoi’s subsidiary to investors on international stock exchanges; and to make arrangements so that Erdenes-Tavantolgoi owns more than 70 percent of the subsidiary’s shares;
2.4. To take measures required to efficiently carry out the initial public offering in a short period of time;.
Erdenes Tavantolgoi Mining company has been established at the Erdenes Tavantolgoi JSC in charge of the initial public offering plans and was preparing for IPO on international stock exchanges.
After the cabinet’s meeting yesterday, Minister of Mining and Heavy Industry D.Sumiyabazar clarified that parliamentary resolution and recommendation by the National Security Council enabling the stock market launch of the Erdenes Tavantolgoi JSC shares are still effective and the works of the IPO launch of the company’s shares are still underway.
“The cabinet’s decision only dissolves the Erdenes Tavan Tolgoi Mining, a subsidiary of the Erdenes Tavantolgoi” added the minister. He further said that the government’s decision made yesterday is connected with current falls of commodity prices on the global stock markets due to COVID-19 pandemic and “internal conflict and involvement of politics”, which led to delay in the IPOs.
Since its establishment in 2008, the Erdenes Tavantolgoi JSC had the highest sales revenues in 2018 and 2019, with USD 1 billion last year and has provided funding for a number of large scale development projects of the country, such as Zuunbayan and Gashuunsukhait railway projects, ‘Tavan Tolgoi Fuel’ project aimed at reducing air pollution in Ulaanbaatar, and also has repaid debts of USD 350 million to Aluminum Corporation of China Limited (CHALCO).
"The successful IPO of the Erdenes Tavantolgoi will create 10,000 jobs and will help fund railway projects to continue further.” said Minister Sumiyabazar.
He noted that the global commodity price drops and a decrease in demand from China have caused 50 percent decline in the sales revenue of the state-owned coal mining company and a shortage of MNT 250 billion of its contribution to the state budget. “If this issue persists, the mining industry revenue could fall by 50 percent already by the end of this year. I doubt that the Erdenes Tavantolgoi will earn profits this year” said the Mining Minister.