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IVN closed +13.06% in Toronto, +12.96% in NY. RIO closed +7.61% in London
Mongolia, Ivanhoe, Rio agree on mine; shares rise
LONDON/TORONTO, October 6 (Reuters) - The Mongolian government, Ivanhoe Mines (NYSE:IVN, TSX:IVN) and partner Rio Tinto (LSE:RIO, ASX:RIO) have agreed to back a 2009 investment agreement for the Oyu Tolgoi copper-gold deposit, ending discussions over possible changes and sending shares of Ivanhoe up as much as 18 percent.
The news calmed investors, who had sold off the stock last month after Mongolia's finance minister told local media that the government was discussing changes to the terms and conditions of the agreement.
The 2009 deal gave a 66 percent stake in the massive Oyu Tolgoi project in Mongolia's South Gobi region to Canadian miner Ivanhoe, in which mining giant Rio Tinto (RIO.AX: Quote) now owns a 48.5 percent stake.
The Mongolian government holds the remaining 34 percent stake and can increase its stake to 50 percent after 30 years.
Some politicians had hoped Mongolia could increase its stake in the project faster than outlined in the existing agreement, but investors warned that populist policies could slow the country's mining boom.
Wednesday's joint statement said that "all parties have reaffirmed their continued support for the investment agreement and its implementation." It sent Ivanhoe's shares up as high as C$18.81 on the Toronto Stock Exchange. The stock was 11.52 percent higher at C$17.33 in the afternoon.
Rio Tinto's UK-listed shares closed up 7.6 percent.
The statement said the shareholders were "united in their commitment to secure the necessary project finance and bring the Oyu Tolgoi project to completion and full production."
Dahlman Rose mining analyst Adam Graf said the news was positive for the development of Oyu Tolgoi and for future mining projects in Mongolia.
"It shows that the contracts have held and that Mongolia honors contracts," he said, noting that the government's move may have been based more on politics than a real desire to change the pact.
Ivanhoe and Rio Tinto have already sunk billions of dollars into Oyu Tolgoi, which is expected to begin initial production in 2012.
They expect average annual output during its first 10 years of commercial production to exceed 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds (544,000 tonnes) of copper.
Mongolia retreats on stake row over Rio mine – Financial Times, October 6
Rio, Ivanhoe get to keep Mongolian hoard – The Sydney Morning Herald, October 6
Mongolia,Ivanhoe,Rio Commit To Oyu Tolgoi;Shares Up – Dow Jones Newswires, October 6
Ivanhoe Mines reaffirms Oyu Tolgoi investment deal with Mongolian government – Mining Weekly, October 6
Mongolia reaffirms Oyu Tolgoi investment agreement – The Canadian Press, October 6
Won't force change to mine deal, Mongolia says – The Globe and Mail, October 6
Mongolia reaffirms support for Oyu Tolgoi mine – Financial Post, October 6
Halfway to where? – The Economist, October 6
Joint statement on Cabinet Press Office Website
МОНГОЛ УЛСЫН ЗАСГИЙН ГАЗАР БОЛОН АЙВЕНХОУ МАЙНЗ, РИО ТИНТО КОМПАНИЙН ХАМТАРСАН МЭДЭГДЭЛ
2011 оны 10 дугаар сарын 6 (open-government.mn) --
1. Монгол Улсын Засгийн газраас дэвшүүлсэн Оюутолгойн Хөрөнгө оруулалтын гэрээтэй холбогдох хоёр асуудлаар Монгол Улсын Засгийн газар болон Айвенхоу Майнз, Рио Тинто компаниуд санал солилцов. Талууд Хөрөнгө оруулалтын гэрээний хэрэгжилтийг үргэлжлүүлэн дэмжиж ажиллахаа дахин нотлов.
2. Монгол Улсын Засгийн газар Оюутолгойн Хөрөнгө оруулалтын гэрээг Монгол Улсын хууль, тогтоомжтой бүрэн нийцэж байгуулагдсаныг дахин бататгав.
3. Хөрөнгө оруулалтын гэрээг байгуулснаас хойш Монгол Улс гадаадын хөрөнгө оруулагчдын сонирхлыг ихээр татсан орнуудын нэг болсон билээ. Монгол Улс дэлхийн хамгийн хурдацтай хөгжиж буй улс орнуудын нэг болсон байна. Оюутолгой төслийн бүтээн байгуулалтын үйл ажиллагаанаас Монголын ард түмэн ихээхэн үр ашиг хүртэж байгаа бөгөөд цаашид төсөл ашиглалтанд орж үйл ажиллагаа эхэлснээр улам их үр ашиг хүртэх болно.
4. Хөрөнгө оруулалтын гэрээнь Оюутолгой төслийн барилгын ажлын үндэс суурийг бүрдүүлсэн бөгөөд саяхан барилгын ажлын 50%-ийг нь гүйцэтгэж дууссан, ирэх жилийн гуравдугаар улиралд анхны бүтээгдэхүүнийг гаргаж эхлэхээр байна. Айвенхоу Майнз, Рио Тинто компаниуд өнөөдрийг хүртэл Оюутолгой төсөлд 2.6 тэрбум ам.доллар зарцуулсан бөгөөд уг төслийг ашиглалтанд оруулахын тулд цаашид ихээхэн хэмжээний хөрөнгө зарцуулна.
5. Хөрөнгө оруулалтын гэрээний 15.30-д "Талууд бичгээр харилцан тохиролцсоны үндсэн дээр энэхүү Гэрээнд нэмэлт, өөрчлөлт оруулж болно" гэж заасан. Монгол Улсын Засгийн газар Хөрөнгө оруулалтын гэрээний энэхүү зүйлд заасан эрхийн дагуу холбогдох өөрчлөлт оруулахаар санал солилцох байр сууриа илэрхийлсэн гэж Айвенхоу Майнз, Рио Тинто компаниуд үзэж байна. Монгол Улсын Засгийн газраас илэрхийлсэн байр суурийг Айвенхоу Майнз, Рио Тинто компани хүндэтгэн үзэж байгаа бөгөөд Монгол Улсын Засгийн газар Хөрөнгө оруулалтын гэрээний хэрэгжилтийг үргэлжлүүлэн дэмжиж байгааг талархан тэмдэглэж байна.
6. Монголын ард түмний тусын тулд Оюутолгой төслийг дуусгаж бүтээгдэхүүнээ бүрэн гаргах нөхцөлийг бүрдүүлэх, шаардлагатай төслийн санхүүжилтийг баталгаажуулах талаар Хувь нийлүүлэгч талууд хамтран ажиллах болно. Бүх хувь нийлүүлэгч, хөрөнгө оруулагч, зээлдэгч, ажилчид, гэрээт гүйцэтгэгчид,иргэний нийгмийн байгууллагуудболон орон нутгийн иргэд Оюутолгой төслийн ирээдүйд бүрэн итгэлтэй байж болно.
Lucky Strike Resources Ltd.: CN Coal Project 272 Mt Measured Plus Indicated and 232 Mt Inferred NI 43-101 Resources
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 5, 2011) - Lucky Strike Resources Ltd. ("Lucky Strike" or the "Company") (TSX VENTURE:LKY)(OTCQX:LKYSF) is pleased to report initial coal resources in the measured, indicated and inferred resource categories for the CN Coal Project in the Tuv Aimag province of Mongolia.
Initial coal quantities at the CN Coal Project includes:
158.1 million tonnes
113.9 million tonnes
232.0 million tonnes
The drillhole data used in quantifying the coal resources was from two of the six mining exploration licenses which represents 1,132 ha of the total 13,093 ha, or less than 10% of the total licenced area. Considering the positive confirmation of substantial initial resource and the lack of sufficient data to estimate resources for the entire extent of the CN Coal Project, Lucky Strike will primarily focus on further exploring the CN Coal Project to test the potential of resource expansion.
The resource estimations are principally from an initial 2,000 m of drill data collected from the eleven core and rotary holes of a 2009 drill program supervised by Norwest along with supporting historic drilling. Core recovery for the coal seams sampled was between 94 and 100 percent. Analytical results from the 2009 coal core samples indicate the following average coal quality:
% air dried Moisture
% air dried Ash
% air dried Sulfur
Air dried Kcal/Kg
Borehole data indicates that the strata dip to the northeast at 7 to 10 degrees and the coal seams can be traced laterally across the drilled properties. The NI 43-101 technical report concludes that the geology type of the CN Properties is of "Low – type C" geologic complexity. This is based on the Geological Survey of Canada (GSC) Paper 88-21, which is a guideline reference for coal deposits as specified in NI 43-101. Based on the reported coal thicknesses and depth of the coal occurrences below ground surface within the mining exploration licenses, the CN Coal Project sequences are considered to be a "Surface Resource of Future Interest" deposit type.
As part of the preparation of the independent NI 43-101 technical report, Lucky Strike has completed a Legal Title Opinion for the six mineral exploration licences covering a contiguous area of 13,093 hectares (131 sq. km) located approximately 175 km SW of the capital city of Ulaanbaatar and 45 km SE of the Buren Soum village center in the Tuv Aimag province in Mongolia.
Norwest recommends a two-phase exploration program. The first phase would consist of conducting detailed geologic mapping, infill and step-out drilling (approximately 8,000 m) to increase tonnage within the measured and indicated assurance categories, hydrologic and geotechnical testing followed by an interim report. The second phase would consist of additional drilling (approximately 5,000 m) on the remaining area covered by all licenses to potentially extend the resource base. Lucky Strike also plans to have magnetic and surface geophysics surveys run on the property.
The Company has purchased the data to complete the NI 43-101 technical report in consideration for the payment of $25,000 upon signing of the data purchase agreement with Gulfside Minerals Ltd. with a further payment of $300,000 upon the completion of Lucky Strike's option to acquire an 80% interest in the CN Coal Project.
Edwin Ullmer, P. Geo., a Qualified Person as defined by National Instrument 43-101 and an independent consultant of the Company, has read and approved the technical and scientific information contained in this news release.
The Company also announces that, subject to regulatory approval, it has granted to the employees and consultants 250,000 stock options exercisable at $1.25 per share for a period of five (5) years, subject to a vesting period of 36 months.
About Lucky Strike Resources Ltd.
Lucky Strike Resources is a growth-focused exploration company creating shareholder value through the exploration and development of coal, minerals and energy projects in Mongolia and worldwide. Mongolia, centered between the growing consumption markets of China and Russia, holds vast, untapped, rich coal and mineral resources. Lucky Strike focuses on exploring and developing the CN Project in Central Mongolia. The Management team has proven experience in the global exploration and mining industry as well as in Asia.
Gulfside Enters into Data Purchase Agreement – PRNewswire, October 5
ACA investigating Russian director of Erdenet factory
October 6 (news.mn) Sources have informed news.mn that the Investigation Board of the Anti-Corruption Authority (ACA) is investigating A.I.Formenkii, the Russian director of the Erdenet Factory. The investigation relates to a "factory matter." ACA investigators have taken statements from some factory employees.
Our correspondent asked an ACA official about the investigation. The official confirmed it is taking place but refused further comment because the investigation is ongoing.
The ACA is currently investigating MP Kh.Narankhuu and Mongol Bank President L.Purevdorj for possible embezzlement when Kh.Narankhuu worked as a director of the Erdenet factory. L.Purevdorj was head of the State Property Committee at the time.
MIAT considering name, logo changes
October 6 (news.mn) MIAT, which is officially known as Mongolian Civil Air Transport, is considering changing its name to Mongolian Airlines. The airline is also thinking about changing its logo.
Sources say a final decision has not yet been made, but managing officials will discuss the matter after MIAT takes delivery of its four new Boeing jets on October 17. A billboard on Sukhbaatar Square is advertising the impending arrival of the four new planes.
The Mongolian sandwich
A tug of war between commercial logic and popular sentiment
October 6 (The Economist) COUNTRIES choose their friends but not their neighbours. Mongolia has just two, China and Russia. Both are huge; and both, at different periods in history, used to dominate it. Two decades after the collapse of the Soviet Union, Mongolia—once called the 16th Soviet republic—is enjoying the exercise of full sovereignty. And it is expecting a giddy few decades of spectacular growth fuelled by the exploitation of its mineral riches. Yet its biggest market is China, which would happily gobble up as much copper, coal, gold and other minerals as Mongolia can produce. And its only alternative route to other markets is through Russia. Its natural riches should buy it a new freedom of manoeuvre; but many Mongolians worry that they could lead to a new form of dependence, tantamount to commercial subjugation.
That is not the position of the government. Tsogtbaatar Damdin, state secretary in the foreign ministry, insists that Mongolia is "very happy" with its neighbours. His country is "the buffer and the filling that makes this sandwich very juicy". Yet despite the colourful boosterism, Mongolia also has a "third neighbour" policy, of making friends with the rest of the world. This suggests that, in this instance, two are not enough.
Ordinary Mongolians, moreover, are less enthusiastic, especially about China and the Chinese. Even cosmopolitan liberals are unabashedly disdainful of their southern neighbours. Chinese workers, of whom many are needed to sustain a building frenzy in the capital Ulaanbaatar and the mines, live segregated lives or, says one ethnic-Chinese factory manager, are routinely beaten up on the streets, with no hope of recourse if they go to the police. Some Chinese restaurants pretend to be Korean.
The reasons for the animosity are not immediately obvious. Economic ties are flourishing and more than 2,000 Mongolians study in China. It is true that, under the ethnic-Manchu Qing dynasty, which fell in 1911, China ruled Mongolia cruelly. Many Chinese feel that Stalin cheated their country out of sovereignty over Mongolia. But China asserts no claim, and you could go back to Kublai Khan to argue that China was in fact part of Mongolia.
Nearly twice as many Mongols live in China (5.8m) as in Mongolia (2.8m)—with some 4m of them in the Chinese border province of Inner Mongolia, where they make up about one in six of the population. But after a brief flurry of "pan-Mongolism" in the 1990s, nationalist passion in Mongolia about the perceived plight of their ethnic brethren under the Han-Chinese yoke seems largely doused. When protests erupted in Inner Mongolia after the death in May this year of an ethnic-Mongol herder—allegedly when he was run over by a coal-lorry driven by an ethnic-Han Chinese—the response in Mongolia itself was muted.
China has at times played the bully. In 2002, when the Dalai Lama visited Mongolia, where Lamaist Buddhism has revived after the Soviet collapse, China huffily closed the border. But more than memories of the past, it is fear of the future that feeds Mongolians' worries about China. For a vast, poor and sparsely populated land, anxiety about a neighbour with over 450 times as many people and an economy that has been booming for three decades is perhaps inevitable. China buys over 80% of Mongolia's exports and provides nearly half its imports.
The anxiety has been sharpened by the incipient mining boom. Besides hundreds of small mines being developed to satisfy Chinese demand, two huge projects will transform Mongolia. One, a copper-and-gold mine at Oyu Tolgoi (see ) is expected to start production in 2013. At the other, Tavan Tolgoi, coal production is projected to expand from 16m tonnes a year to a staggering 240m tonnes by 2040. Both are in South Gobi province, which borders China. They will help meet the ravenous needs of China's hectic urbanisation.
From Ulaanbaatar, situated to the north of the Gobi, it can easily look as if parts of the south are being integrated into China. Supplies for the projects pass across the border and the mines' output will soon return. Ambitious plans are being aired to build new railways not just to nearby China, but into Russia or eastern Mongolia as well, whence there would be access to the markets of South Korea and Japan. Some economists argue this makes no sense, despite the fear of a loss of pricing power to a Chinese monopsony. Even the gauge of the railway is controversial—a narrow-gauge one to the south that would link seamlessly with China's network is the obvious option, and the one that people working on the project say is being adopted. But the Soviet-built trans-Siberian railway is broad-gauge.
Relations with Russia have improved. An effort to revive Mongolian script to replace the Cyrillic alphabet imposed in the seven decades of Soviet domination petered out. Russia, or the Soviet Union, is credited with having preserved at least nominal Mongolian independence, when the country might have been absorbed by China. But suspicions linger. This summer Mongolia ran short of diesel because Russian imports dried up. The official reason was a shortage of domestic supply. Many Mongolians suspected a Chinese-style political squeeze.
Can good friends become good neighbours?
So the search for third neighbours is understandable. Mr Tsogtbaatar points out that the country with more Mongolian expatriates than any other is neither China nor Russia, but South Korea. Next comes America. A vigorous if family-dominated democracy and mineral treasure-chest, Mongolia is a strong Western ally, contributing troops to the wars in both Iraq and Afghanistan. A measure of its stature is that, by the middle of this week, Germany's Angela Merkel was still due to desert Europe's crisis for a visit on October 12th. It will go more smoothly now that German courts have freed a senior Mongolian official detained on kidnapping charges. Mongolia may still be short of neighbours, but the whole world wants to be its friend.
Did the World Suddenly Stop Needing Copper?
October 6 (The Motley Fool) Someone must have held a giant torch to the global copper market. Otherwise, how are mere mortals to make sense of this complete meltdown in copper-related stocks over the past couple of months?
Since early August, copper prices have slipped 30% from about $4.50 per pound to $3.11. Copper mining stocks have proven to be a devastating choice for 2011, with even popular favorites Southern Copper (NYSE: SCCO ) and Freeport-McMoRan Copper & Gold (NYSE: FCX ) suffering declines on the order of 50% year-to-date! Most of that damage has come quite recently, corresponding to a horrendous 36% retreat for the Global X Copper Miners ETF (NYSE: COPX ) just since the end of August.
I wish I could say I saw this coming. I did not. In fact, I sounded the "all-clear" for copper miners back in May following a prior correction, and as a result my concurrent selection of the First Trust ISE Global Copper Index Fund (NYSE: CU ) for my Motley Fool CAPS portfolio has underperformed the S&P 500 Index (INDEX: ^GSPC) by more than 22%. Credit to my Foolish colleague Alex Dumortier, who expressed near-term concern for copper prices after reviewing commentary from analyst Simon Hunt. Hunt's view that "we could see prices rise to around 9500 and then begin falling to at least 7500 by October" has proven quite prophetic, as the per-tonne price recently breached $7,000.
What's melting these copper prices?
Contracting growth outlooks around the globe -- and in particular the growing concerns over a potential hard landing for China -- appear the most easily identifiable conductors of the metal's sudden weakness. But that's far from the whole story. In addition, persistent debt distress in European markets has fomented a noteworthy advance for the U.S. dollar index. In fact, as my colleague Sean Williams points out, the dollar has outperformed even silver year-to-date on the strength of its recent rally.
Given that powerful one-two punch, copper is obviously not crashing by itself. Rather, the full suite of industrial raw materials -- including steelmaking components iron ore and metallurgical coal -- have suffered in tandem. So after a decade of extraordinary price gains for copper and other key commodities, is this the end of the line for the broader commodities bull market? According to this Fool, certainly not! As was the case in 2008, when a far deeper correction blasted the sector and buried related equities miles below any rational notion of fair value, I maintain this latest event will likewise produce merely a volatile chapter within the long-term secular bull market for commodities … rather than a lasting reversal of the trend. That's not to say the current correction could not carve deeper still, since expectations for industrial demand around the world clearly remain fluid.
While there can be no doubt that a relative slowdown in China could send powerful waves of repercussions throughout the global economy, I find it extremely difficult to envision a scenario where China's demand for copper ceases to mount. Furthermore, nations around the world facing bleak economic conditions will likely turn to public investments in infrastructure for stimulative effect. Combining that baseline demand outlook with persistent constraints on global supply, I maintain we are still left with a sound fundamental framework for copper despite global growth concerns. Equipment manufacturer Joy Global (Nasdaq:JOYG
The seaborne markets for copper, coal and iron ore continue to be driven by strong demand from China, India and other emerging markets. Although industrial production and export growth is showing signs of slowing in China, massive infrastructure programs should sustain GDP growth at high levels. Imports were reduced as China worked down inventories of copper and coal in the first half of this year, but recent increases of imports have started to replenish these stocks. This move from de-stocking to restocking for copper and coal will support commodity demand even if growth slows.
As the macroeconomic outlook continues to dim, some taming of expectations for copper demand is wholly appropriate, but from my vantage point the recent sell-off in shares of quality copper producers smacks of a disconnect from resilient long-term fundamentals. What's more, when we consider that a single trader -- identified by The Daily Telegraph as none other than JPMorgan Chase (NYSE: JPM) -- had cornered at least 50% of the entire copper supply of the London Metals Exchange by late 2010, I believe the copper market had grown structurally prone to occasional and volatile disconnects from underlying fundamentals.
At around $3 per pound, copper prices remain quite elevated from a historical perspective, and my ongoing analysis of the global supply pipeline combined with baseline demand expectations from China and emerging markets continues to support a long-term bullish outlook for copper and the low-cost miners that produce it. Frankly, notwithstanding the recent dollar rally, the long-term outlook for the U.S. dollar and other structurally strained currencies supports that case. Without daring to declare a bottom in this near-term sell-off, I cannot ignore the glaring valuations left in its path. Taseko Mines (AMEX: TGB ) stood out to me as a compelling value near $4.50 per share last June, so you can just imagine what I think of the valuation here beneath $2.70! Ivanhoe Mines (NYSE: IVN ) has fallen further than some as the Mongolian government expressed interest in revising the terms of its agreement regarding the world-class Oyu Tolgoi mine that is progressing toward commercial production during the first half of 2013. The mine is already Mongolia's cuprous meal-ticket, and I have every expectation the agreement will stand in its present form. [Author's note: a joint statement issued by the government of Mongolia, Ivanhoe Mines, and Rio Tinto on the date of this publication upholds the existing agreement.] These names stand out to me, but truthfully I find the entire sector remarkably undervalued here. As a result, I am effectively doubling down with my bullish bet on copper miners by adding the Global X Copper Miners ETF as a second sector ETF within my Motley Fool CAPS portfolio.