“Erdenes Tavan Tolgoi” JSC that plans to launch an IPO of 30 percent of its shares on the international stock exchanges introduced its operational report of the first half of 2018 on Monday. During the reporting period, the company has accumulated MNT 216.5 billion to the state budget. Specifically, 6.8 tons of coal were exported during the first half of this year and the company earned sales income of MNT 953 billion. This year, the company planned to centralize MNT 285 billion to the state budget, and, currently, it has reached 78 percent of its target. As a result, ‘Erdenes Tavan Tolgoi ‘ JSC has earned net profit of MNT 373.3 billion. By the end of the year, the net profit of the company is expected to double. Erdenes Tavan Tolgoi, which operates in the eighth year, produced its 40th million ton of coal this month. The company is now able to finance some of projects, noted Mr.Gankhuyag, CEO of ‘Erdenes Tavan Tolgoi’ JSC. The increase in export coal prices played a major role in the company’s profitability.

For instance, Erdenes Tavan Tolgoi’s management has repeatedly negotiated with the Chalco Trading Holding Company on the coal price of East Tsankhi. This led to a rise of USD 59.33, to USD 61, making it profitable. The West Tsankhi’s coal was set at open price of USD 69 and USD 70. These price changes have made a major impact in the company’s net profit of MNT 373.3 billion. The amendmends to the contract made it possible a base price to rise in case of a rise in world coking coal price. The base coal price would not fall below USD 61. Thus, the strong financial performance of ‘Erdenes Tavan Tolgoi’ attracts the investors and makes it one step closer to the launching an IPO. Erdenes Tavan Tolgoi has increased its staff’s salaries by 21 percent this year and increased the night shift salary by five times.

In preparation for the IPO, th company is commencing an audit by accredited international organizations and cooperating with financial and legal consultants and stock exchanges. About 15 percent of Erdenes Tavan Tolgoi’s shares are owned by 2.5 million citizens and 486 business entities. The remaining 85 percent is held by the Government. Coal exports are increasing year by year. Last year, the company exported 8.5 million tons of coal, making 25 percent of Mongolia’s total coal exports alone. The company aims to export 13 million tons of coal this year. The “Erdenes Tavan Tolgoi” financial results are clearly showing signs of its recovery. The company’s net profit was accounted for MNT 461 billion in 2017. Currently, the company is aiming to reduce administrative costs and operate more efficient. At the same time, it has invested over MNT 40 billion to social responsibility programs.

Also, the company has launched the ‘Erdenes-Eko mine’ program. The Parliament has decided to launch IPO of 30 percent of Erdenes Tavan Tolgoi’s shares on the international market. Even though the company has surpassed its political endeavors, and has improved its financial performance, a successfull IPO issuance will  depend from the coking coal market.

Coking coal prices are relatively stable in the world market this year. In the medium term, it is expected to keep the current price fairly well. According to estimates by the Australian Energy Organization, the coking coal extraction was expected to reach 196 million tons in 2018, and supply has increased slightly from the previous year. In the Asia Mining magazine, “Metallurgical coal demand and supply are equal in 2019-2020.” The IPO of Erdenes Tavan Tolgoi will increase the efficiency of use of the Tavan Tolgoi deposit. It will create a new climate for corporate governance. Likewise, the risk of weakening in coking coal prices is lower in the short and medium term.

Source: ZGM.mn