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FANG Fenglei, Goldman Sachs Group Inc's China partner, is investing US$300 million in the owner of a Mongolian iron ore mine together with Singapore's Temasek Holdings Pte, his first deal since starting a private equity fund last year.
Hopu Investment Management Co, founded by Fang in 2007, joined with Temasek to buy three-year convertible bonds in Hong Kong Lung Ming Investment Holding Ltd, which operates the mine, according to a document seen by Bloomberg News. The document's contents were confirmed by two people familiar with Fang's plans. They requested anonymity because the talks are private.
Fang gave up day-to-day duties running Goldman's China venture last year to focus on his private equity firm, while remaining chairman. He joins Rio Tinto Group and BHP Billiton Ltd in seeking to tap Mongolia's mineral wealth as China's construction boom pushes iron ore prices higher.
"This is a very impressive first move for Fang," said Liu Yang, who manages US$4 billion at Atlantis Investment Management Ltd in Hong Kong. "The Chinese government is putting a lot of support behind the iron ore industry, and China's demand for the material will also last for a very long time as consumption grows."
Hopu Investment will join Los Angeles-based Clarity Partners LP and Credit Suisse Group as an investor in Lung Ming, according to the document.
Controlling stake
Lung Ming controls 53 percent of a company that owns and operates the Eruu Gol iron ore project in Mongolia. Its local partner, Dornyn Gobi LLC, owns the rest, according to the document.
Hopu Investment will invest between US$150 million and US$200 million in Lung Ming and Temasek, Singapore's US$120 billion sovereign wealth fund, will provide the rest, according to the people. Temasek spokesman Mark Lee declined to comment.
The bonds will pay 10 percent interest. Lung Ming plans to sell shares in Hong Kong this year in an initial public offering, according to the document. The projected annual yield on the investment is 25 percent to 35 percent.
Mining accounts for 30 percent of Mongolia's gross domestic product and 78 percent of exports, according to government data.
Mongolia, where annual per-capita income is about US$1,000, is considering changing mining laws to force companies to share output or give more than half their projects to the state. Law makers are deadlocked on the legal amendments, Ganpurev Dugarjav, vice chairman of Mongolia's Foreign Investment and Foreign Trade Agency, said last week.
The Eruu Gol iron ore mine, 90 kilometers northeast of Darhan, owns three adjacent iron ore deposits under a single mining license valid until 2037.
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