UPDATE 2-SouthGobi Energy raising $400 mln in Hong Kong IPO

* Hong Kong IPO follows Toronto listing

* To use proceeds to develop Mongolia coal assets

* Shares rise 4.3 pct, parent Ivanhoe gains 5 pct (Adds background, stock reaction. In U.S. dollars unless noted)

HONG KONG/TORONTO, Jan 4 (Reuters) - Canada-listed coal miner SouthGobi Energy Resources (SGQ.TO) plans to raise about $400 million from a Hong Kong initial public offering this month, according to a term sheet obtained by Reuters.

The news sent shares of SouthGobi up 4.3 percent on Monday, and lifted shares of its 80 percent owner, Canada-based Ivanhoe Mines IVN.TO by 5 percent.

SouthGobi, which started IPO premarketing on Monday, is focused on expanding its coal production capacity in Mongolia, centered around its Ovoot Tolgoi mine. It said it would use the proceeds of the share sale to expand production capacity and access regional infrastructure.

The expected cash infusion follows a $500 million investment from China sovereign fund China Investment Corp [CIC.UL] announced in October, which SouthGobi also plans to use to expand its Mongolia development.

Ovoot Tolgoi's production target for 2009 was 1.5 million tonnes and it plans to eventually extract 8 million tonnes of metallurgical and thermal coal a year from Ovoot Tolgoi.

SouthGobi Chief Executive Alexander Molyneux told Reuters in December the company has more than 400 million tonnes of resources, and plans to add to that number.

The mine is located just 40 kilometers north of the Mongolia-China border and began selling coal to Chinese buyers in September 2008.

According to the term sheet, 75 percent of the offering would be allocated to institutional investors, 15 percent to Canadian investors and 10 percent to Hong Kong retail investors.

The company will kick off a marketing road show on Jan. 11, aiming to list on Jan. 29 under the symbol "1878" (1878.HK).

Citigroup (C.N) and Macquarie (MQG.AX) are handling the IPO.

Like SouthGobi, main shareholder Ivanhoe is based in Vancouver, British Columbia.

Ivanhoe, which was founded and is 23 percent owned by financier Robert Friedland, is currently developing the massive Oyu Tolgoi copper-gold project in Mongolia.

Rio Tinto (RIO.L) owns a minority stake in Ivanhoe and is its funding partner on Oyu Tolgoi.

SouthGobi stock was up 74 Canadian cents at C$17.84 on the Toronto Stock Exchange, while Ivanhoe was up 75 Canadian cents at C$16.26.

($1=HK$7.75)

($1=$1.04 Canadian) (Reporting by Saeed Azhar and Kennix Chim in Hong Kong and Cameron French in Toronto; editing by Peter Galloway)