GEM to buy 49 percent stake in Chinese coal mine

The Global Emerging Markets Group has agreed to acquire a 49 percent stake in a coking coal reserve in Inner Mongolia. The deal is GEM’s second direct private equity investment in the country.

The Global Emerging Markets Group has agreed to acquire a 49 percent stake in a coking coal reserve in the Inner Mongolia province of China from Inner Mongolia Mengxi Minerals Limited. The deal’s financial details were not disclosed.

A Chinese coal mine

The resulting joint venture will give GEM the right to 70 percent of the distributions and profits from the coal mine’s coking and mining businesses, which are expected to be operational by early 2008.

GEM has hired Jonathon Yeap, formerly chief executive of Enron China and managing director of Enron Asia Pacific, to be chairman and chief executive of the join venture.

In addition, Hong Kong-listed electronics company Tomorrow International Holdings and GEM have signed a memorandum of understanding by which Tomorrow International could acquire a 21 percent stake in the 99.6 million ton coal reserve from GEM.

The deal represents GEM’s second direct private equity investment in China. Previously, the firm was a limited partner in the CICC/Morgan Stanley Fund, and also invested in China through the public markets. This August the firm closed its first direct investment in the country, a $28 million investment to back the management buyout of Hong Kong consumer electronics business Ansen Investment Holdings.

GEM is currently raising a $1 billion fund with the China International Trust & Investment Company. The fund will target non-oil and non-gas natural resources, particularly hard mineral resources in China, Southeast Asia and Africa. The coking coal mine deal, however, will not be made out of this fund.