HONG KONG—Inner Mongolia Yitai Coal Co. and Mongolian Mining Corp. are planning initial public offerings in Hong Kong, becoming the latest coal miners to choose the southern Chinese city as the market of choice for raising capital.
The listings highlight China"s increasing energy needs. Coal mines in Mongolia and Inner Mongolia, the northern Chinese province that borders Mongolia and Russia, are keen to expand their production capacity by taking advantage of China"s increasing coal consumption. China was a net exporter of coal until last year, when rising domestic demand, coupled with the start of a major overhaul of mines in the production hub of Shanxi province in northern China, prompted it to scour the Asian-Pacific region for coal.
Yitai Coal, based in China"s Inner Mongolia, plans to raise $1 billion to $2 billion in an IPO in the fourth quarter, three people familiar with the situation said Wednesday. Mongolian Mining, a coking-coal producer formerly known as Energy Resources, is looking to raise about $700 million in a listing Oct. 5, according to a term sheet.
Mongolian Mining"s IPO will be the first in Hong Kong by a company based in Mongolia. SouthGobi Energy Resources Ltd., the largest coal producer in Mongolia in terms of export sales, raised $436.3 million from its Hong Kong IPO, but its headquarters is in Canada.
Yitai Coal has said it hopes the IPO will help fund its planned acquisition of 8.45 billion yuan ($1.24 billion) in coal assets from parent company Inner Mongolia Yitai Group. The number of new shares it plans to issue would amount to at least 15% of its enlarged share capital. The company"s assets totaled 23.12 billion yuan at the end of March.
Mongolian Mining plans to list about 20% of its enlarged share capital before an overallotment option of about 15% of the deal size is exercised, according to the term sheet.
Mongolia"s largely untapped mineral and energy resources have been generating a lot of interest from investors. Mongolia"s proximity to China, a major customer for its iron ore, copper, coal and other commodities, adds to its appeal.
Mongolian Mining"s Ukhaa Khudag mine is roughly 152 miles from the Chinese border. The company intended to build a private railway linking the mine to the Chinese border, but those plans have been put on hold as the Mongolian government plans to build a railway link to Sainshand and connect with the Trans-Mongolian Railway. In the absence of an extensive network of railways, many Mongolian mining sites truck resources to China.
Citigroup Inc. and J.P. Morgan Chase & Co. are bookrunners on the Mongolian Mining deal. UBS AG, BOC International Holdings Ltd., China International Capital Corp. and BNP Paribas SA are handling the Yitai Coal deal, the people said.