HONG KONG - Canada-listed coal miner SouthGobi Energy Resources has secured Asia's top sovereign wealth funds, China Investment Corp (CIC) and Temasek, as cornerstone investors in its planned $400 million Hong Kong IPO this month, a source told Reuters on Friday.
China's CIC and Singapore's Temasek will each subscribe to $50 million worth of shares, said the source, who has direct knowledge of the deal but declined to be named due to the sensitive nature of the matter.
The presence of the cornerstone investors, who buy shares before a public listing and promise to hold them until a later date, gives another high profile boost to the Mongolia-focused miner.
SouthGobi's IPO follows a $500 million investment from CIC announced in October, which SouthGobi plans to use to expand its Mongolia development.
What's relevant about it is the quality of the cornerstones, the source said.
It's a sign that CIC thinks there's more upside, and that Temasek, the cornerstone investor with the best reputation in Asia, has endorsed the strategy.
CIC has been particularly aggressive with investments in the resources sector in recent months. The fund made a number of stake acquisitions last year, including a 14.5 percent stake in commodities firm Noble Group for $850 million, and a 17.2 percent stake in Teck Resources for $1.5 billion.
SouthGobi, which started IPO premarketing on Monday, is focused on expanding its coal production capacity in Mongolia, centered around its Ovoot Tolgoi mine.
Ovoot Tolgoi's production target for 2009 was 1.5 million tonnes and it plans eventually to extract 8 million tonnes of metallurgical and thermal coal a year from Ovoot Tolgoi.
The mine, located just 40 kilometers north of the Mongolia-China border, began selling coal to Chinese buyers in September 2008.
SouthGobi will kick off a marketing road show on January 11, aiming to list on January 29 under the symbol 1878.
Citigroup and Macquarie are handling the IPO.
According to a term sheet obtained earlier by Reuters, 75 percent of the offering will be allocated to institutional investors, 15 percent to Canadian investors and 10 percent to Hong Kong retail investors.
(Reporting by Joseph Chaney, editing by Will Waterman)