Sharyn Gol JSC

TOP CONTRIBUTORS

Vincent Jow

Introduction

Sharyn Gol JSC has a coal mining operation located in Northern Mongolia. It is currently a single asset company, owning 100% of the established Sharyn Gol Coal Mine. Originally a state run enterprise developed to supply local utilities, the Company was privatized and listed on the Mongolian Stock Exchange in 2003. Sharyn Gol JSC has been mining coal at Sharyn Gol for over 45 years. Their greatest strength is that they already have an established, dedicated 65km rail spur links the mine to the Trans-Mongolian railroad. This allows Saryn Gol JSC to export their coal to Russia and China, and even beyond to the East Asian markets of Japan, Taiwan and South Korea. In 2010, Sharyn Gol had EBIT of $2.226 billion MNT (US$1.8 million).^[1]

Business Growth

From its peak production, coal extraction reached 2.5mn tones annually. However, because of a deterioration of equipment and increased stripped ratio, production decreased to 0.5 mn tones per year. With New York-based Firebird Fund as a 61% shareholder, Sharyn Gol has had the benefit of improvements to its management team which is working to convert the company into a western-style coal company through an ongoing full-scale restructuring.^[2]

Trends & Forces

Electricity deregulation stimulates domestic demand

The Mongolian government is planning deregulate the electricity market. This deregulation of the electricity market will also be positive for local thermal coal prices, increasing profit margins for thermal coal mines like Sharyn Gol.^[3]

Increasing Demand from China makes Mongolia a key supplier

Mongolia has very good mining conditions usually suited for surface mining. Due to typically low strip ratios, extraction costs are usually low, giving mining operations a major competitive advantage compared to peer operations in Russia, China, and the rest of the world. Mongolia’s location near China and Russia makes it an ideal exporter of coal.^[3]

Competition

With dozens of public mines and foreign investment pouring into Mongolia, there are many mining companies in Mongolia. Some include:

• Mongolian Mining
• Southgobi Resources
• Mongolia Energy Corp