CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.
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ERD closed +1.12% to 45c
Erdene Confirms Continued Widespread Gold Mineralization at Altan Nar
Recent Drilling Identifies Near-Surface High Grade Zone and Confirms Expanded Gold Mineralization
HALIFAX, NOVA SCOTIA--(Marketwire - Jan. 26, 2012) - Erdene Resource Development Corp. ("Erdene" or "Company") (TSX:ERD), is pleased to announce receipt of final assay results from a 20-hole scout drill program at the Company's 100% owned Altan Nar (Golden Sun) property in southwest Mongolia.
"Altan Nar has now demonstrated it hosts widespread gold mineralization including wide, near-surface zones potentially conducive to bulk mining, coupled with zones of higher grade mineralization that appear to become more substantial at depth," said Peter Akerley, President and CEO. "These initial results suggest that Altan Nar has the potential to host a significant gold-polymetallic deposit and we are planning an aggressive evaluation program in 2012."
Highlights
· Drilling has confirmed the presence of gold-polymetallic mineralization throughout a 1 square kilometre area;
· Drilling has identified a wide (up to 125 metres) gold-bearing polymetallic epithermal system along a strike length of greater than 300 metres;
· Drilling has outlined steeply-dipping mineralized zones that suggest an increase in gold mineralization at depth;
· Mineralization is open at depth and along strike;
· Anomalous gold-bearing mineralized zones intersected in 15 of 24 holes;
· High grade zones come to surface in the northern portion of discovery zone: TND-28, 5.2 g/t gold and 75 g/t silver over 4 metres;
· Two zones of greater than 1 g/t gold and 10 g/t silver in TND-28 measuring 21 and 12 metres in width.
…
IVN closed -1.76% in NY to $17.26, -1.75% in Toronto to C$17.36
Rio Tinto May Seek Changes at Ivanhoe Mines
January 27 (Bloomberg) Rio Tinto Group (RIO), the world’s third- largest mining company, may seek to replace Ivanhoe Mines Ltd. (TSX:IVN, NYSE:IVN)’s senior management after moving to increase its stake to 51 percent this week.
Rio is reviewing Ivanhoe’s management though it has no “current plan to make any change in the present board of directors or management,” London-based Rio said in a filing. “The Rio Tinto companies anticipate that they will, in the future, seek the replacement of some of the management, including senior management, of the company and at least a majority of the non-Rio Tinto appointed directors.”
Rio this week said it bought C$302 million ($301 million) of stock in Ivanhoe, the owner of the $6 billion Oyu Tolgoi copper and gold mine in Mongolia, paying C$20 apiece for 15.1 million shares. It said at the time that it had no “current intention” of buying more stock.
“Rio is looking to do small, incremental steps with Ivanhoe and putting your men on the board is probably the next natural progression,” Chris Weston, institutional dealer at IG Markets in Melbourne said by phone. “It would make a lot of sense to put your own people in place in a company where you’ve gained control.”
Rio Tinto rose 1.9 percent to A$69.65 at 11:37 a.m. in Sydney today, compared with a 0.6 percent rise in the benchmark S&P/ASX 200 Index. Bruce Tobin, a Rio Tinto spokesman, didn’t immediately return a phone message seeking comment.
Oyu Tolgoi
Construction of Oyu Tolgoi is 70 percent complete and commercial production is due to start in the first half of 2013, Rio said this week.
Ivanhoe owns 66 percent of Oyu Tolgoi, which is located 80 kilometers (50 miles) north of Mongolia’s border with China. The project will be one of the world’s five biggest copper mines, according to Rio, (RIO) which is managing its development.
DRG +9.78% intraday to 50.5c
DRAIG APPOINTS CHIEF OPERATING OFFICER
January 27 -- Coal explorer Draig Resources Ltd (ASX: DRG) (“Draig” or the “Company”) is pleased to announce the appointment of Mr Yin Wong as Chief Operating Officer (“COO”).
Mr Wong has over 25 years experience in the resources industry, largely in the coal sector, covering mine planning, mine monitoring, project development, coal trading, business development and technical advisory roles. Mr Wong has spent the last 8 years living and working in Asia.
Most recently, Mr Wong worked for commodities trading house Noble Group, where he was responsible for coal trading and business development in the Central Kalimantan region of Indonesia in the capacity as Vice President. Prior to this role, Mr Wong was part of the Asset Development Team responsible for the assessment of potential coal assets within various parts of Asia, including Mongolia and southern Africa.
In his role as COO, Mr Wong will be responsible for the development of Draig’s existing coal licences, the establishment of key operational management roles and responsibilities, and business development.
Welcoming the appointment, Draig Managing Director Mark Earley said: “We are pleased to have secured somebody of Mr Wong’s calibre to join the Draig management team. His qualifications are a perfect fit for Draig as we develop our Mongolian coal licences and seek other coal opportunities in Mongolia, as well as in Indonesia.”
Other previous roles held by Mr Wong include Mine Development Manager for the Asmin Koalindo Tuhup coking coal Project in Central Kalimantan and a senior mine planning role with Kaltim Prima Coal in East Kalimantan. Whilst resident in China, Mr Wong worked for a major Australian mining consultancy group, assessing projects in both China and Mongolia. In Australia, he worked for Rio Tinto in the NSW Hunter Valley.
Mr Wong holds a Bachelor of Mining Engineering from the University of New South Wales and is a member of the Australian Institute of Mining and Metallurgy.
GUF trading flat at 80c at time of writing
Credit Suisse reduces Guildford stake to 5.08% from 6.11% on market
January 27 (Mogi) Change in Substantial Holder Notice in Guildford Coal Ltd (ASX:GUF) dating January 27 Credit Suisse sold over 3.4 million shares on market to reduce its stake from 6.11% to 5.08%.
President of Mongolia Visits Ukhaa Khudag Mine
HONG KONG, Jan. 26, 2012 /PRNewswire-Asia/ -- Mongolian Mining Corporation ("MMC", or together with its subsidiaries, the "Group"; HKEx: 975), is pleased to announce that the President of Mongolia Mr. Elbegdorj Tsakhia visited the Group's Ukhaa Khudag coal mine on 19 January 2012, as part of his visit to Tavantolgoi coalfield and Oyutolgoi gold-copper mining project both located in Southern Gobi, Mongolia.
While touring the extended mine facilities at Ukhaa Khudag, including the country's first coal handling and preparation plant (CHPP), power plant and other infrastructure components, the President witnessed raw coal processing at first hand from inside the CHPP. The President also visited the miners' town with complete social infrastructure solutions including an elementary school, kindergarten, shopping facilities, etc.
In comments to the press at the end of the site visit, the President Elbegdorj gave high appraisal to the fast-paced project development at Ukhaa Khudag mine and its exemplary contribution to the domestic mining sector growth (www.president.mn):
"I am impressed by the advances and progress of the development work taking place at Ukhaa Khudag and see it is a great example of what Mongolians are capable to achieve in the free market environment. I feel most proud of the hard work and commitment of the thousands of Mongolians that are taking part in the project development. I also see that the government support has become increasingly important in accelerating successful projects and undertakings like the one we see here at Ukhaa Khudag."
The President of Mongolia also stressed the importance of railway development in the Tavantolgoi area and urged the relevant authorities to take immediate measures in speeding up the long expected railway project (www.president.mn).
MONGOLIA IS 100TH IN PRESS FREEDOM INDEX
Ulaanbaatar, Mongolia, January 26 /MONTSAME/ Mongolia has been ranked the 100th by its press freedom index among the world's countries. The ranking for 2011/2012 was released on Wednesday by the Reporters without Borders (RWB) international NGO.
According to the report, Mongolia's rank went down against the previous year, followed by Gabon, Cyprus and Chad. By the index of 2010, Mongolia was the 76th.
Finland and Norway have been considered as the freest for the press countries, keeping their ranks of the previous years, whereas Syria, Turkmenistan, the DPRK and Eritrea are the least free.
CWP to hold assembly, may change name
January 26 (news.mn) MPs S.Oyun and D.Enkhbat told journalists on Thursday that the Civil Will Party (CWP) will hold its assembly on January 28.
The MPs said the assembly will discuss the party platform and a possible name change. It will also discuss revising the party seal and the party symbol if the name is changed. The national committee of the CWP will be changed because the party re-forms the committee every four years.
Also, members of the Green Party (GP) will join the CWP during the assembly because an alliance between the two parties still has not been approved by the State Supreme Court (SSC). However, the GP and the CWP have agreed to the alliance, which is why members of the GP headed by D.Enkhbat decided to join the CWP.
Officials from both parties are working with lawyers to resolve the alliance dispute.
City officials release plans for 2012
January 26 (news.mn) Ulaanbaatar Administration officials on Wednesday announced several projects planned for 2012.
Ts.Tsogzolmaa, the deputy mayor for social policy, said MNT 435 billion has been allocated for capital investment and construction projects, MNT 34 billion of which will go toward the construction of police stations and hospitals in khoroos.
B.Munkhbaatar said MNT 70 billion has been allocated for road repair and construction, including work that was not finished in 2011. He said road repairs are planned to begin in April and tenders should be announced beginning February 1. He also told of plans to repair and build roads in the Biokombinat, Yarmag, Zuragt, and Denjiin 1,000 areas, where roads have been damaged due to rain or heavy use.
B.Baatarzorig introduced the public transportation plan, which calls for 1,600 buses to serve 70 routes in Ulaanbaatar. The Ulaanbaatar Administration Office has decided to implement the plan in phases. B.Baatarzorig said the city budget allocated MNT 45.3 billion for public transportation in 2011. As a result of that investment, he said, bus companies have expanded vehicle capacity and improved their garages.
B.Baatarzorig said the plan will also aim to improve the skills of drivers and conductors, because a survey by the Consumers Rights Protection Association showed many customers were not satisfied with public transportation services.
Bus fares could be going up
January 26 (news.mn) Rising gasoline prices have forced taxis to increase fares, and buses could be next.
P.Narantsetseg, the head of the Public Transportation Office, told our correspondent that a liter of diesel fuel now costs MNT 1,830, and, if this situation continues, it will not be feasible for large buses to maintain their current fare of MNT 400. She said that, if the Government doesn’t take measures to reduce fuel prices, the fare could be increased to MNT 500.
An estimated 6,000 passengers use public transportation in Ulaanbaatar daily. Citizens are unhappy about possible bus fare increases because of gasoline prices and the taxi fare increase.
UB Post: The future of renewable energy in Mongolia
January 26 (UB Post) he future potential for renewable energy in Mongolia is recognised in its fifteen year renewable energy program. Under this ambitious scheme, the Government has set out plans for renewable energy to reach between 20-25% of total energy production by 2020. However in a country where the focus tends to be fixed firmly on traditional fossil fuels, sometimes this potential gets overshadowed. This may be about to change.
A recent visit to Mongolia by a delegation from German renewable energy company RENAC concluded that; 'the time is exactly right to support capacity building... in the field of renewable energies in Mongolia'. The delegation from the Berlin-based concern visited Mongolia on a fact finding mission late last year and have now made public their encouraging conclusions.
First and foremost, the Mongolian renewable energy sector, compared to other developing countries, has experience with projects in remote areas, concludes RENAC. This is crucial in a vast country with the worlds lowest population density. Married with the already existing Government strategy for the development of renewable energy which includes an energy law with feed-in-tariffs for solar and wind projects, Mongolia appears ready to begin this new energy adventure.
RENAC specialises in the conveyance of experience and knowledge of the production, planning and engineering of renewable energy technologies, their financing, marketing and sales, and the opening up of international markets for renewable energy and energy efficiency technologies.
The visit to Mongolia came as part of its so called TREE project, Transfer Renewable Energy and Efficiency, an international training program which, with the support of the German Foreign Office, hopes to transfer German renewable energy know-how abroad. “Through this further development to the TREE project, we can now extend the transfer of expertise in renewable energy and energy efficiency”, said RENAC’s CEO, Berthold Breid.
The Mongolian Government backed National Renewable Energy Program 2005-2020 (NREP 2005-2020) has itself concluded that until now Mongolia is overly dependent on coal and 'renewable energy utilisation has not been considered with the same strategic importance as conventional energy development'. Further, the program laments lack of economic incentive policies, few financing mechanisms and a fundamental lack of public awareness of the significance of renewable energy.
Although the RENAC visit was seen as a success, its report identifies several areas where progress needs to be made if Mongolia is to take full advantage of its renewable resources as well as an urgent need to look to cleaner energy solutions than coal.
The report is critical of Mongolia's conventional power sector, which, though improving energy efficiency in a number of projects, is far from being optimal. It cites the highly inefficient use of heat energy, be it for heating homes and other buildings through the distance heating system or the use of in the growing "ger" districts in the capital. 'The latter is causing tremendous air pollution in Ulaanbaatar, one of the most urgent problems to be solved,' it concludes.
Following the first series of talks and workshops which found that 'the know-how currently available in Mongolia is limited and that especially practical training is needed to operate the plants which have already been installed,' RENAC is planning to follow-up with two Mongolia-specific training packages. Taking the form of online classes and seminars in Berlin, the first will focus on renewable energy resource assessment including an introduction to technologies not yet in use in Mongolia. The second will be a seminar on the integration of renewable energies in the power grid and power sector development.
Aimed at stakeholders from the public sector, universities, industry representatives from the power sector and financing institutions, these seminars are a crucial step if the ambitious targets outlined in the NREP 2005-2020 are to be met. The Government has pledged to supply more than 100, currently off-grid, Soum centres with renewable energy and supply every rural family with solar power by 2020.
RENAC, is an international provider of training in renewable energies and energy efficiency. It has so far trained participants from over 100 countries in Berlin and abroad and through its Blended Learning program offers customised training with a high practical content to targeted groups.
CapitalistExploits: Frontier Markets Investing 101
January (Capitalist Exploits) I was recently asked the question, “What is a Frontier market?” So, today I thought I’d follow up on our recent post, Cambodia – The New Emerging Market..?, wherein we had a conversation with the CEO of Leopard Capital, Doug Clayton, and answer this question as best I can.
Frontier Markets are those which are less developed than Emerging Markets. They are distinctly different from “Failed Markets,” which are popularly referred to as “failed States” by the media. Examples of “failed Markets/States” would include Afghanistan, Somalia and Honduras.
At the risk of annoying a few folks (a risk I don’t particularly give a hoot about) I could add to this list, “Failing States.” In this category I would include the United States of America, the United States of Europe, and the United States of Great Britain. These “States” just haven’t quite figured out that they’re failing yet. Fear not, reality comes to all.
There exists a couple of core, or guiding concepts that have led me to invest so enthusiastically in Frontier Markets, and I wanted to share those with you today:
1. It is my contention that people all over the world are pretty much the same when it comes to the desire to increase their own living standards;
2. Each incremental dollar earned has a converse effect on the desire to earn an additional dollar once certain thresholds are met. Take for example a country such as Rwanda, with a per-capita income of somewhere around US$600. Earning one additional dollar per day translates into a 61% increase in income. I don’t know of many people who would not wish to increase their income by 61%. Incentive is therefore high. At the same time in a country such as Qatar, with a per-capita income of roughly US$109,900, earning an additional $1 per day translates into a minuscule 0.3% net income increase. Hardly an incentive, and certainly nothing that will have any noticeable impact on the spending habits of a Qatari;
3. Finally, but just as importantly, I want to invest in markets with as little correlation to the “Failing States” mentioned above as possible. It’s a paradox that the countries that have been closed off to the global market place are less affected by trouble in the world’s developed markets. At the same time some of these countries are moving towards opening their markets. The base level at which they are starting at is likely to rise even in an environment where the world’s developed markets are de-leveraging. The risk/reward setup is greatly in my favour in certain Frontier Markets in comparison to developed western markets.
Closely related to point 2 above is the fact that frontier markets, since they are coming off of such a low base, allow for any small increase in per-capita income to create a disproportionately large return for investors.
With that said, there are Frontier Markets which can languish for many years and simply drain your capital. What is required is a trend change. Things need not necessarily get “good,” but merely get less “bad” for an investor to make multiples on their money.
Some factors to consider when investing in Frontier markets
There are significant nuances to investing in Frontier Markets that are 180 degrees different to investing in developed, liquid capital markets.
Contracts are often worthless. Even if you’re armed with lawyers, have realms of documentation and can cite the “laws” of the land ad nauseum, all of that is more often than not a waste of your money and time. If there does not exist a reliably functioning judiciary, you as a foreign investor will ALWAYS find yourself drawing the short straw. Instead, we believe it is better to focus on people, and acquiring a reliable network of locals to assist in transactions.
Often times in Frontier Market countries the social stigma of a poor reputation, and what it means to the person that is stigmatized, is your greatest weapon. Reputation has meaning to people within a small community. As a disconnected foreigner you are just an outsider, and often it is seen as being acceptable to “rip you off.” Not so for a local.
So, finding local partners whom you can trust decreases your risks substantially. Try to find people with a lot to lose if their reputation is tarnished. They will typically be people who are successful from having added value to people’s lives.
In Frontier Markets price discovery is difficult and erratic,and liquidity is poor. Both of these “disadvantages” are arguably the strongest reasons to invest in frontier markets!
Price discovery – The argument has been made that an outsider cannot better understand price than a local. This is a false assumption. As an outsider you often have a broader arsenal of experience available than a local does.
Bringing with you that broad view of the world, and having the ability to supplant knowledge, capital and expertise into a frontier market, allows an investor and or entrepreneur the ability to see how adding (technology, capital, marketing, product distribution, etc.) value can increase cash flows. Rising cash flows are a precursor to rising asset values, which will ultimately provide multiples on your capital investment.
It is far easier to find deeply undervalued and miss-priced assets in Frontier Markets than in well-developed, normally functioning markets. The lower the FDI (Foreign Direct Investment) in a country, ceteris paribus, the greater the opportunity to find and negotiate favourable terms as an investor.
Liquidity – Emerging Markets have liquidity, Frontier Markets have little to none. As such, the stresses associated with the daily, weekly or monthly price fluctuations inherent in liquid, deep markets allow an investor to focus on the fundamentals of a particular investment. The lack of liquidity itself goes hand in hand with the price discovery discussed above.
Non – Correlation – Traditionally frontier markets have shown a very low correlation to highly-developed markets. This is often due to isolation. Frontier Markets have often been cut off from the rest of the world. As a result they are often somewhat insulated from things like global recession, or even depression. These countries will not feel those effects, but rather manage to grow less-rapidly than they might when the outside world is booming.
So, coming full-circle, any incremental increase in living standards in Frontier Market countries has the very real potential to create significant returns on an investor’s capital.
This is the present day situation in countries such as Myanmar, Rwanda, Cambodia and Zimbabwe. There are others that are at differing stages of advancement, like one of our favourites, Mongolia.
Consider that as little as 10 years ago investing in China, India and Brazil was considered “risky.” Those were exotic investment markets not long ago, yet today they occupy large percentages in many a fund managers portfolio, and have provided the early investors and speculators with life-changing returns.
- Chris
“our studies show that the frontier markets do not necessarily have greater risk. That’s because in many of these markets, the volatility is not as great as in other markets, including developed markets, since the markets are not so liquid.” – Mark Mobius
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"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
Email: mogi@cpsinternational.mn
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CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSLicense Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
Disclosure/Disclaimer
CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.
CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.
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