SharynGol JSC (MSE: SHG) announces regulatory approval of Tender Offer for Naco Fuel JSC (MSE: NKT).

SharynGol JSC (MSE: SHG; Bloomberg code: SHG MO; “SharynGol”) is pleased to announce that it has received approval from the Financial Regulatory Commission, the Mongolian capital market regulator, to launch a Tender Offer for the acquisition of 100% of the shares of NACO Fuels JSC (MSE: NKT; Bloomberg code: NKT; “Naco”), a public company listed on the Mongolian Stock Exchange. Naco owns and operates a coal enrichment and briquetting plant based on Darkhan that is designed to take thermal coal from SharynGol JSC (MSE: SHG) and to enrich it into carbon rich char and subsequently into smokeless briquettes producing far less pollutants when burned. With its direct access to rail, the plant is strategically situated to provide char which can be used as a partial coke substitute to industrial customers in Darkhan and to ship smokeless environmentally friendly briquettes by rail to customers in Ulaanbaatar.

nakomapThe replacement of raw coal with smokeless briquettes as the primary heat source in the ger districts would significantly reduce air pollution in Ulaanbaatar. According to a report by the World Bank, “Compared to other cities for which data are available in global databases, and also compared to Chinese cities with high PM (particulate matter) concentrations, UB appears to be the most PM-polluted capital and is among the cities with the worst air quality in the world.” Smokeless briquettes enable the generation of heat from a high-energy value, smokeless, environmentally clean energy source.

The plant is currently on care-and-maintenance. The plant was designed to have a total annual capacity of 100,000 tons of char production. SharynGol plans to restore the plant to full capacity and is reviewing the potential to increase capacity. Furthermore, coal tar and coal gas, by-products of the coal enrichment process, represent significant additional streams for cash generation.

Graham Chapman, SharynGol’s CEO, stated: “Shareholders representing over 94% of Naco shares have indicated that they intend to tender. The acquisition of Naco will represent a logical expansion of SharynGol into the highly attract market for coal briquettes. SharynGol intends to continue to make investments to maximize the company’s ability to generate revenue and cash flow growth for the benefit of all its shareholders.”

SharynGol, located north of Ulaanbaatar, is a leading producer of high-grade thermal coal and sells to state-owned power stations, local cement factories as well as retail consumers.