UPDATE 2-Mongolia TT mine IPO may come by yr end; rail deal signed

* IPO for Tavan Tolgoi expected by end 2011, early 2012

* Mongolia to decide on listing venue as early as June

* South Korea’s Lotte signs deal for connecting railway (Adds details on rail link)

HONG KONG, March 25 (Reuters) - The highly anticipated initial public offering by Mongolia’s Erdenes-Tavan Tolgoi will take place at the end of 2011 or the first quarter of 2012, a top Mongolian government official said on Friday, while a South Korean consortium has a deal to build a railway line for the world’s largest untapped coking coal deposit.

The IPO is a key step for impoverished Mongolia to raise funds and develop its massive mining resources, with fast-growing nations such as China, India and Korea clamouring for more minerals.

The Mongolian government could announce the listing venue for the IPO by as early as June. The IPO is estimated by bankers to be in a range of $1.5-5 billion, Enebish Baasangombo, chief executive of state-owned Erdenes MGL, told Reuters in an interview on the sidelines of the Mines and Money conference in Hong Kong.

“Consultation on the stock exchange will be done with the banks after discussions with the Hong Kong stock exchange and the London stock exchange,” he added. “We need to see which will be more beneficial. There are many issues.”

Baasangombo declined to comment on the potential size of the IPO, saying: “It’s a little early to talk about the size of the offering, but we have high expectation on that.”

The deal would also be a boon for Goldman Sachs Group Inc , Deutsche Bank AG , BNP Paribas SA and Macquarie Group Ltd , which have been short-listed to manage the offering.

Erdenes, the state-owned company in charge of the eastern block of Tavan Tolgoi, plans to keep 50 percent of the project, and will distribute 10 percent of the shares to local residents, 10 percent to Mongolian companies and 30 percent in the form of the IPO. The west Tsankhi block of the mine has 1.2 billion tonnes of coal reserves and could produce 15 million tonnes annually for more than 30 years.

Mongolia has short-listed ArcelorMittal SA , Vale SA and Xstrata Plc among six bidders to develop Tavan Tolgoi.

U.S. coal miner Peabody Energy Corp , a consortium of China’s Shenhua Group and Japan’s Mitsui & Co Ltd , and a separate consortium of Japanese, South Korean and Russian companies were the other preferred bidders.


Unlisted Lotte Engineering & Construction said in a statement on Friday that the rail project connected with Mongolian Railway was expected to cost $3 billion and the company aimed to begin construction in the first half of 2012, around the same time as the planned IPO.

The 1,040 km railway will link Tavan Tolgoi in the South Gobi Desert and the eastern city of Choibalsan, Lotte added.

Demand for coking coal from big Asian buyers such as China, Japan and South Korea has pushed prices to near record highs this year.

Additional reporting by Ju-min Park in SEOUL; Editing my Matt Driskill