[ET Net News Agency, 14 April 2014] Moody's Investors Service said Mongolian Mining
Corporation's (MMC, Caa2 negative)(00975) joint venture with Shenhua Group is credit
positive for MMC because the cross-border railway will lower coal transportation costs
with little investment.
Last Tuesday, MMC announced that it will establish a joint venture with Shenhua Group to
build a cross-border railway to transport coal to China from Mongolia.
With MMC currently using trucks to transport coal to China, transportation costs
accounted for 26.7% of its costs of goods sold and 22% of its revenue in 2013, said the
credit rating agency.
MMC will hold 17% of the equity in the consortium, while Shenhua will hold 49% and
Mongolian companies Erdenes Tavan Tolgoi and Tavan Tolgoi JSC will each hold 17%. Seventy
percent of funding for the Sino-Mongolian Border Crossing Railway will be from loans that
Shenhua will be responsible for obtaining.
MCC's investment in the consortium will be smaller than if it financed all of the
railway construction itself, which will alleviate pressure on MMC's liquidity and allow it
to better manage a challenging operating climate, said Moody's. (KL)