Mongolia lures Temasek, CIC and other Sovereign Wealth Funds

21 Dec 2009

Mongolia is becoming an attractive investment destination for Asian and Middle Eastern Sovereign Wealth Funds (SWFs) that seek gaining exposure to massive untapped natural resources in this frontier land, strategically located at the doorsteps of China, the world’s largest consumer of commodities. Following the landmark deal between the Mongolian government and Ivanhoe Mines and Rio Tinto over Oyu Tolgoi (the world largest undeveloped copper-gold mine), Mongolia has captivated attention of global resource companies and investors alike. In the last three months, Ulaanbaatar, Mongolia’s capital witnessed the visits by senior executives of eight SWFs including from China, Singapore, Korea, the UAE, Kuwait, Libya and others.

Among SWFs, Temasek was the first to make foray into Mongolia. Last year Singapore’s US$120bn sovereign fund together with Hopu Investment invested US$300mn in then Lung Ming (now Iron Mining International), a developer of iron ore mine in Mongolia. China Investment Corp, China’s US$300bn SWF made headlines by committing US$1.2bn in two transactions within one week this October as CIC agreed to invest US$500mn in SouthGobi Energy, a coal miner and up to US$700mn in Iron Mining International.

We believe that sovereign funds will become active investors in Mongolia in coming years. SWFs would join both strategic and portfolio investors that are expected to pour billions of dollars in investments per year into Mongolia. These investments will allow Mongolia to become one of the world’s fast growing economies throughout the next decade.

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