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Origo acquires stake in Gobi Coal and Energy

Origo Sino-India and Origo Resource Partners have acquired a 21 per cent stake in Gobi Coal and Energy for an aggregate amount of USD15m. 

 

OSI has invested USD4.5m for an approximate 6.4 per cent shareholding and ORP has invested USD10.5m for an approximate 14.9 per cent shareholding. 

Upon completion of the transaction, OSI and ORP’s combined shareholding will be the largest equity interest in Gobi. 

Gobi has significant coal resources in Mongolia and is positioned to supply fast growing demand from clients in both western and north eastern China. It is a privately owned coal company headquartered in Ulaanbaatar and has raised financing in several rounds with international financial institutions. 

The chief executive and chairman of Gobi, Mo Munshi, was previously executive vice president for business and corporate development at Ivanhoe Mines.

The company owns two coking and thermal coal deposits (Shinejinst and Zeegt) approximately 133km apart from each other in the south-western Bayanhongor region of Mongolia. 

Gobi is planning to develop into a significant, low cost open cast producer of thermal and coking coal. Subject to raising further funds, positive outcomes of current and proposed feasibility study work and the receipt of approval for infrastructure investments, the company aims to progressively increase production levels from the Shinejinst and Zeegt deposits. For the year ended 31 December 2008, Gobi made an operating loss of USD5.7m.

Origo intends to establish representation in Ulaanbaatar following the investment, having already identified a variety of China demand driven investment opportunities in sectors such as coal, iron ore, copper, gold and uranium.

The acquisition has been funded from the respective cash resources of OSI and ORP. Origo will take up a seat on the board of Gobi and will use its experience in China to assist the company in becoming a significant provider of coal to the Chinese market. 

The recommended merger of OSI and ORP was announced on 16 October 2009 and is subject to the approval of the shareholders of both companies. It is expected that the merger of OSI and ORP will complete on 14 December 2009.

Chris Rynning, chief executive officer of OSI and executive director of ORP, says: “I am delighted we have been able to identify and complete the investment in Gobi, a company which we believe will become a significant provider of high quality coal to China. We look forward to providing Gobi with the support they need to capture the significant China based growth opportunities available to them.

“Following recent encouraging developments in the Mongolian investment climate, we believe that our investment in Gobi has the potential to deliver considerable value to Origo shareholders. We expect Origo will continue to source similar acquisition opportunities.”

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