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Baganuur will still lose money, even if State owns only 51%
2016-06-09
Baganuur Mining, which supplies Ulaanbaatar’s power plants with coal, plans to issue 9.87 million new shares in June to raise capital. This will also bring down the State’s ownership of the company to 51%, from the present 75% in the name of Erdenes Mongol. Of the remaining 25%, MNCC LLC owns 21.4%, and individual citizens and others the rest.
Baganuur Mining needs $183 million for its first-phase expansion plans, but the new share issue will not be enough for this. The company has not yet decided how to raise the necessary funds. It has been losing money as it has to sell coal at prices fixed by the State. As of now, extracting a ton of coal costs Baganuur MNT32,000, but the sale price is MNT28,700. The State will continue to set prices even after its ownership is reduced to 51%.
Baganuur’s proven reserves now stand at 812 million tons, and it must raise its annual capacity to 10 million tons by 2020 to meet the demands of the proposed 700-MW Baganuur power plant, the 5th thermal power plant, and the coal gasification plant. The company extracted 3.7 million tons of coal last year and supplied this to the Ulaanbaatar, Baganuur, Erdenet, and Darkhan power plants.