Number crunching: Mongolia

Among emerging markets the BRICs, and latterly the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), tend to take centre stage.

However, after years of turmoil Mongolia is a rising star, with its economy, nicknamed the ‘wolf’ economy, being the fastest growing of its kind in 2011.

The reason for this growth? Mining. Estimates suggest that Mongolia has $1.3tr (£820bn) worth of untapped mineral resources, although managing the country’s mineral resources is an ongoing issue.

In spite of any issues, there are clearly a number of foreign companies interested in investing in the Mongolian minerals market. For example, Aluminium Corporation of China (Chinalco), which is undertaking a number of mining projects in Mongolia, has owned a 12.9 per cent stake in Rio Tinto since 2008.

According to data compiled by Thomson Reuters, of the 85 deals that took place in the Mongolian market between 2009 and 16 May 2012, 66 were related to the mining and metals sector. Of the deals where values are given only two exceed the $100m mark. The largest was in May 2011, when Mongolia’s primary coking coal producer Mongolian Mining Corp (MMC) acquired QGX Coal from Kerry Mining for $950m.

Milbank Tweed Hadley & McCloy advised MMC, while Davis Polk & Wardwell advised the sellers.

Milbank, alongside Mallesons Stephen Jacques, Conyers Dill & Pearman and Mumbai-based Economic Law Practice (ELP), advised MMC on its first IPO on the Hong Kong Stock Exchange in 2010, with Skadden Arps Slate Meagher & Flom advising the managers. For MMC’s follow-on offering in 2012, Allen & Overy and Mongolian law firm GTs Advocates acted for MMC. Hogan Lovells advised Macquarie.

Hogan Lovells has also been advising state-owned mining company Erdenes on developing the Tavan Tolgoi mining project in southern Mongolia.

One deal included in the data (but not listing legal counsel) is the recent $925m bid by Chalco (a subsidiary of Chinalco) to buy a 60 per cent controlling stake in Mongolian coal miner SouthGobi Resources from rival Vancouver-based copper and gold mining company Ivanhoe Mines. Clifford Chance, Chinese firm Jincheng Tongda & Neal and Fasken Martineau advised Chalco, with Goodmans acting for Ivanhoe, Freshfields Bruckhaus Deringer advising SouthGobi and Ashurst acting for the independent committee of directors.

With the rising number of deals it is no surprise there has been a steady flow of foreign law firms into the capital, Ulaanbaatar. Hogan Lovells started the trend in 2010 when it entered into an alliance with local firm GTs Advocates. DLA Piper then announced in 2011 that it was entering Mongolia through a non-exclusive tie-up with local firm C&G Partners.

Allens Arthur Robinson (AAR) opened a representative office there in November 2011. AAR is a longstanding adviser to Rio Tinto, whose joint venture Mongolian Oyu Tolgoi project is the world’s largest undeveloped copper and gold mine.

Earlier this year two more firms took the plunge when Minter Ellison announced plans to open an office and Clyde & Co said it was setting up an association with local firm Khan Lex Advocates.


Mongolia has the mammoth task of coping with foreign demand for its mineral resources and the potential economic and environmental cost of becoming ‘Minegolia’. Although it is the fastest growing economy in the world there is a danger of it becoming too dependent on variable commodity prices. In the run-up to the June elections foreign investors have voiced concern over changes to foreign investment laws and mining legislation, and how these will affect projects such as the Tavan Tolgoi mine, which have already been subject to extensive delays.

Top five deals 2009-12

Milbank advised MMC on its $950m (£602.5m) acquisition of QGX Coal. Davis Polk advised the sellers.

Clifford Chance, Jincheng and Fasken Martineau advised Chalco on its $925m  bid to buy a stake in SouthGobi Resources from Ivanhoe Mines. Goodmans acted for Ivanhoe and Freshfields for SouthGobi.

Green Global Resources acquired the share capital of North Asia Resources from Mountain Sky and Ultra Asset International for $237m.

Nature acquired the share capital of Tian Sheng from Bao Fung for $87.1m.

Singapore’s Hunnu acquired 70 per cent of the Altai Nuurs coal project for $42.1m.