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In 2012, Mongolia took the unique and possibly unprecedented step of distributing shares in Mining company Erdenes Tavan Tolgoi (Erdenes TT) to more than two thirds of Mongolian citizens (1,072 shares each). For several years since, the share ownership of many Mongolians has been “in name only” with these individuals not being able to realize any benefits or rights normally offered by share ownership.
Nearly six years later, such share “ownership” is finally being formally registered.
Erdenes TT is a subsidiary of Erdenes MGL (a government owned coal mining company). The Board of Erdenes TT voted on March 1 to formally register the share ownership of these 2.5 million people, which will account for approximately 20% of total shares of the company.
The effects of this move are expected to have significant effects on the Mongolian financial system and may mark a turning point for the country’s economy.
First of all, many of these 2.5 million Mongolians will now be able to collect dividends on the Erdenes TT shares for the first time. More many people, this will be the first time they have ever experienced ownership of a corporation. These new shareholders will also be able to use their shares to vote on important company business.
For those that wish to sell their shares and gain an immediate profit, shares may be sold via the Mongolian Stock Exchange once registration is finalized. This raises awareness of the capabilities of the stock market at a time when stock market usage is low and many prospective new companies are seeking funding away from the traditional banking and financial sector. In recent months the Mongolian Stock Exchange has seen it’s first Tech IPO, as well as its first Fintech IPO.
In the wake of a new tax of 10 percent on savings income from bank accounts, interest in the stock market as a potential retail investment is high. In one action nearly 2.5 million Mongolians will now not only have interest in the stock market, but will be invested.
As for Erdenes TT itself, it is a profitable and nearly debt free company which expects to continue to profit from coal mining operations in southern Gobi. Some estimates suggest the 2017 revenue of 1.1 trillion MNT has the ability to double or triple.
Having such a large portion of the nation’s population invested in a single company is a powerful national experiment, that will allow millions to benefit from the prosperity of Mongolia’s mineral wealth.