Press Releases

Source : Dow Jones

Origo CEO Chris Rynning speaks to Dow Jones about Trafigura JV


07 Nov 2011 10:59 GMT DJ UPDATE: Trafigura, Origo In Mongolia Coal, Iron Ore JV
-Trafigura, Origo JV to look at Mongolian iron ore, coal, before expanding into other commodities, neigboring countries

-Private equity firm Origo held talks for two years to find marketing partner

-Agriculture a good target for future JV investments
(Adds comments from Origo CEO interview.)
By Andrea Hotter

LONDON (Dow Jones)-Commodities trader Trafigura Beheer B.V. has formed a joint venture with Origo Partners PLC (OPP.LN) to invest in coal and iron ore opportunities in Mongolia, but may expand its activities to include all commodities in neighboring countries like Russia and Kazakhstan, the companies said Monday.

Beijing-based private equity investment company Origo will share in the benefits of the trading of commodities from assets that the joint venture invests in, while Trafigura will benefit from Origo’s engineering and exploration expertise in Mongolia, where it already invests in coking coal, copper, gold, iron ore and related infrastructure.

“The joint venture represents an excellent opportunity to further strengthen our involvement in Mongolia,” said Chris Cox, director of Trafigura.

Origo has nine full-time geologists on its staff in Mongolia and China, unique for a private equity firm, along with over 50 staff in Beijing.

Origo chief executive Chris Rynning said it held informal discussions with a number of leading trading houses active in commodities marketing over the last two years, and finally opted to work with Trafigura for several reasons, including the fact it was very serious about investing in the region, both in assets and trading.

“Origo has been investing in Mongolia and China for quite a few years; the well-documented challenge for the region is that there are a lot of natural resources but the problem is how to get it out and to market. This is where trading and marketing skills enter, which isn’t core to our operation or private equity in general,” he told Dow Jones Newswires.

The joint venture may expand into other countries as well as widen deeper into metals and move into other sectors, like agriculture. But Rynning said it was important the joint venture didn’t get ahead of itself.

“We thought it was important to narrow it down and get the joint venture working first, with the natural consequence that it would look at potentially including other regions and commodities. We need to demonstrate that it works first, but the intent is that this may grow,” Rynning said.

He noted the agriculture sector is interesting for Origo because it is a relatively “unbeaten path,” with plenty of growth opportunities and consolidation likely to come. The sector also lacks the competition and sophistication of other asset classes that have attracted capital investment in China, such as consumer goods, retail, manufacturing and technology, Rynning said.

The joint venture will be jointly managed by Luke Leslie, Head of Mongolia and Mining Investments at Origo, and Mikhail Zeldovich, Head of Russia/Commonwealth of Independent States and Mongolia at Trafigura. The company’s board will also include Origo’s Rynning and Trafigura’s Cox.