2nd UPDATE: SouthGobi Shares Tumble On Concerns Chalco Bid May Be Derailed, Auditor Quits
April 17 2012 - 7:16AM
Dow Jones News
Investors cast fresh doubt Tuesday on SouthGobi Resources Ltd.
(1878.HK) after the Mongolian government sought a temporary
suspension of some exploration and mining licenses, raising fears
that Aluminum Corp. of China Ltd.'s bid to buy a controlling stake
in the company might be in jeopardy.
SouthGobi, 14% owned by Chinese sovereign wealth fund, China
Investment Corp., said in a statement late Monday that the
Mongolian government made the decision on national security
concerns following Chalco's bid to take control of the Mongolian
miner whose main asset is the Ovoot Tolgoi Mine which produces
coking and thermal coal used in the production of steel and power
generation. SouthGobi also added that the suspension was initiated
to allow the government of Mongolia to review the proposed change
of ownership.
Efforts to reach officials at the Mongolian government were
unsuccessful. Chalco, which agreed to buy a controlling stake in
SouthGobi from Canada's Ivanhoe Mines Ltd. for up to $927.1 million
on April 2, said Tuesday in a statement it is assessing the impact,
but it didn't elaborate.
Land-locked Mongolia needs to tread cautiously in balancing
between its giant neighbors to the north and south. While China is
keen to take much of the country's future exports of coal and
metals, Mongolia wants to ensure it has access to other markets,
and for this it needs export routes to the Pacific that bypass
China. Chinese miners have been stepping up overseas acquisitions
of natural resources to feed the country's rapidly growing energy
demand. The deal by Chalco, as the Chinese company is known, is its
latest in an effort to diversify from aluminum.
"If the acquisition falls through, it would have a negative
impact on SouthGobi which relies very much on Chalco for financial
support to ramp up its production," said Robin Tsui, an analyst at
BOCI Research.
Uncertainties over the deal weighed on the share prices of
SouthGobi and Chalco Tuesday. SouthGobi tumbled 10% Tuesday to a
more than three-week closing low of HK$49.90 in Hong Kong. The
closing price is 24% lower than the HK$65.97 cash offer by Chalco
for each of SouthGobi's shares. Chalco's stock ended 1.6% lower at
HK$3.70 Tuesday.
SouthGobi said it has requested that Ivanhoe and Chalco discuss
the proposed deal with the Mongolian government. The company said
it has also informed Rio Tinto Ltd. (RIO.LN), which has a 51% stake
in Ivanhoe, and CIC.
A CIC representative couldn't immediately be reached for
comment.
Separately, SouthGobi said Deloitte & Touche resigned as its
auditor before its contract with the miner expired, and the auditor
didn't express any concerns in its reports about the company for
the two most recent fiscal years. The company named
PricewaterhouseCoopers LLP to replace Deloitte & Touche
effective April 2.
Deloitte & Touche and PricewaterhouseCoopers couldn't
immediately be reached for comment.
-By Joanne Chiu, Dow Jones Newswires; 852-2802-7002;
joanne.chiu@dowjones.com
--Simon Hall contributed to this article
Ivanhoe Mines (NYSE:IVN)
Historical Stock Chart
From May 2024 to Jun 2024
Ivanhoe Mines (NYSE:IVN)
Historical Stock Chart
From Jun 2023 to Jun 2024