Korea Investment Corp., South Korea’s sovereign wealth fund, took a minority stake in Hong Kong-based commodity supplier Noble Group as the two said they seek to jointly develop infrastructure projects.
KIC, as the fund is also known, bought 59.3 million shares from Noble Holdings, a group associated with Noble Group founder and Chairman Richard Elman, the commodity supplier said today in a statement that didn’t disclose the price. The purchase, worth about US$108 million ($132.2 million) at current market prices, equals about 0.9% of Noble’s outstanding shares.
“The decision is part of the fund’s effort to diversify its investment portfolio,” Kwon Yong Sung, a spokesman for KIC, said by phone in Seoul, declining to comment further.
KIC and Noble’s interests converge in Mongolia, which plans to quadruple its rail network over the next decade to speed up development of coal, copper and rare earth deposits that target commodity buyers in South Korea, Japan, and China.
Noble gained 1.4% to close at $2.23 in Singapore on April 29. The stock exchange is closed today. Noble has opened an office in Mongolia and is shipping coal from the region as it looks to make further investments in the Asian nation’s deposits, Chief Executive Officer Ricardo Leiman said in February.
Closely held Lotte Engineering & Construction is leading a South Korean group’s bid to build the first 1,100 kilometers (680 miles) of rail that Mongolia needs to connect its biggest coal deposit, Tavan Tolgoi, with the existing network.
Mongolia Railroads
State-run Korea Resources Corp. is also part of a Russo-Japanese-South Korean group bidding to develop one sector of Tavan Tolgoi, which would include adding rail links to connect the deposit with Russia’s Far East ports. The West Tsankhi sector may cost US$7.3 billion to develop, Korea Resources said last month.
Building infrastructure to link Mongolian mineral deposits with Russian ports would allow landlocked Mongolia to diversify its commodity sales outside neighboring China and should benefit companies such as Aspire Mining, which operate in Mongolia, according to Hong Kong-based Quam Asset Management, which has a Mongolia-focused fund.
Noble last month more than doubled its stake in Aspire, which is developing the Ovoot coking coal project in western Mongolia, to 8.6%. Noble has also struck an alliance with Xanadu Mines, which plans to develop coal fields in eastern and southern Mongolia, the Sydney-based company said Feb .3.
Commercial Terms
Noble had 6.341 billion shares outstanding as of March 31, Stephen Brown, the company’s head of investor relations, said in an e-mailed response to questions today. Korea’s share purchase was done “on commercial terms, on a willing buyer, willing seller basis,” Brown said.
The investment is the second by an Asian sovereign wealth fund in the energy, food and mining commodity supplier. China Investment Corp. bought shares in 2009 to become Noble’s second-largest holder. The Chinese sovereign wealth fund held 14.7% of Noble as of March 11, according to the latest filings.
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