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08-07-2013, 07:12 PM
(This post was last modified: 23-10-2013, 02:58 PM by CityFarmer.)
A coking coal firm in mongolia which ipo in jan 2010 at 126 hkd.
attracted cornerstone investors such as CIC & temasek who subscribed usd 50m each. CIC converted another usd 250m of debenture resulting in a stake of 13%.
takeover by chalco in apr 2012 was unsuccessful as Mongolia objected due to strategic reasons.
UBS recently increased stake to over 5%.
share px has been dropping over the past 3+ yrs to a recent low of 9+ hkd.
based on today closing px of 9.15, it is just 7% of ipo px.
http://www.eurasiac.com/files/SouthGobi_...300310.pdf
http://www.eurasiac.com/?q=chalco-intend...-resources
To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
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To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
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it is interesting to note that UBS bought additional 80k shares at more than 10hkd in may just before southgobi announced their 1Q results. we all know the various negative news & uncertainty overhanging SG.
Does UBS know something that we don't that convince them to increase their stake to over 5%? Meanwhile, deutsch AG reduced their stake to less than 5%.
I would think CIC, Temasek, UBS & deutsch AG would have done their due diligence check & risk assessment before taking a stake in SG. i would tend to believe SG coal reserves/resources estimates are reliable even though there were rumours in the past that the reserves have been way overestimated.
the vice-chairman of SG is fluent in the mongolian language so i hope he can play a crucial role in resolving the various permit issues with the mongolian mine ministry.
it is said that institutional investors are not keen on firms with low free float. what may be the reasons that UBS is increasing rather than paring down its stake in SG? is it just to average down because its majority shares were bought at much higher px?
To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
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Hi - I have been long and wrong on Mongolian Mining Corp (similar HK listed competitor) plus I did do a couple of deals in the sector in a prior life. My observations on Mongolia /China /Coal :
1. China is the main (and natural) market given geographical proximity.
2. There is a very large difference in cost between shipping the coal by truck than rail. Hence most coal producers aim to build their own railway line (which is expensive and, given the weather, it is difficult to work all year around). I cannot remember the savings of rail vs trucking but, off the top of my head, USD 5-10 per ton, so significant
3. The width of Chinese railway gauges are different from Mongolian ones. Hence, the border crossing can take a long time (ie changing the wheels on the train or offloading the coal to a Chinese train
4. Chinese railway capacity is constrained and having good relations with the railway company is key to get allocated capacity on a timely basis is key (this is highlighted as a key risk in the Winsway prospectus)
5. US shake gas bonanza has made gas a much cheaper energy resource than coal for US companies causing US coal companies to increasingly export to China, causing the Qingdao price (the main import index) to fall
Whilst I don't think that China will be weaned away from coal anytime soon and Mongolia is the natural supplier, I am quite bearish on coal prices in general.....
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To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
Posts: 253
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To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
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14-07-2013, 07:41 PM
(This post was last modified: 14-07-2013, 08:09 PM by port.)
Apr 2012: CHALCO intends to make a proportional take-over bid for up to 60%, but not less than 56%, of the issued and outstanding common shares of SouthGobi at C$8.48 per share
pg108: In March 2010 SouthGobi called USD250mn of principal which
converted into 21,561,000 shares to CIC at CAD11.88. The remaining USD250mn of principle will not be callable by SouthGobi until November 2014. Accounting for the derivative embedded in the convertible debenture distorts SouthGobi’s reported
earnings.
www.mad-mongolia.com/wp-content/files_mf/moncoalia1506111.pdf
from ipo prospectus pg 130:
Normal Conversion Right: After 60 months from closing, at any time the VWAP of the Shares for
50 consecutive business days is 20% higher than the Floor Price of cad 8.88 ie cad 10.656, we
will be entitled to require conversion of the entire Convertible
Debenture at the Conversion Price.
To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
Posts: 253
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To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
Posts: 253
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congrats to all vested. happy national day :-)
To be simple is the best thing in the world; to be modest is the next best thing. I am not sure about being quiet.- G.K. Chesterton
Do not condemn the judgment of another because it differs from your own. You may both be wrong.- Dandemis
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.- Bertrand Russell
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