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. Follow CPSI NewsWire on Twitter, Facebook
Happy Belated Tsagaan Sar!!!
CPS Securities has a SPECULATIVE BUY recommendation on VOR. VOR closed -5.63% to 6.7c on Friday
Voyager Resources’ KM Copper Porphyry Project a potentially company making project
February 24 (Proactive Investors Australia) Voyager Resources (ASX: VOR) continues to drill some of the best copper mineralisation reported in Mongolia at its KM Copper Porphyry Project, which has the potential to be a company-making project.
Notable intersections from the Aranjin prospect, the third shallow hydrothermal breccia to be drilled, are:
- 140 metres at 0.6% copper and 5.3 grams per tonne (g/t) silver from 4 metres, including
o 62 metres at 0.9% copper and 7.7g/t silver from 16 metres and
o 8 metres at 1% copper and 6.5g/t silver from 16 metres; and
- 80 metres at 0.8% copper and 10.3g/t silver from 60 metres to the end of the hole, including
o 30 metres at 1.4% copper and 21.9g/t silver from 68 metres.
Importantly, these results are in addition to the previously announced highlight intersection of 168 metres at 0.74% copper and 5.4g/t silver from 76 metres.
The Aranjin prospect, which is situated about 1 kilometre to the northeast of the Cughur prospect, comprises four large outcrops of quartz tourmaline breccia where rock chip sampling has returned up to 2% copper.
To date Voyager has completed 29 reverse circulation holes, three diamond holes and three diamond core tailed reverse circulation holes at Aranjin and in the surrounding area.
Meanwhile, recent results from drilling to the northeast of the Cughur prospect have potentially identified a fault repeat of the Cughur mineralisation.
Drilling intersected 50 metres at 0.82% copper and 1.87g/t silver from 6 metres about 200 metres away from the core mineralisation at Cughur.
Voyager has so far completed 41 reverse circulation holes, 12 diamond core holes and 16 diamond core tailed reverse circulation holes at Cughur.
Drilling is scheduled to recommence in late March at the prospect to complete an initial JORC Resource on the discovery and potential extensions by June.
Voyager: Half Year Financial Report
February 27, Voyager Resources Limited (ASX:VOR) --
CPS Securities has a SPECULATIVE BUY recommendation on HAR. HAR closed +1.2% on release to 41c, closed -3.66% to 39.5c on Friday. HAR is targeting a Maiden JORC Resource for Bayantsogt by March 2012.
Haranga Resources expands iron mineralisation at Mongolian project
February 22 (Proactive Investors Australia) Haranga Resources (ASX: HAR) has expanded the area and depth of iron mineralisation hosted within the Banded Magnetite Skarn formation at the Bayantsogt prospect of its Selenge Iron Ore Project in Mongolia.
This follows the receipt of the final set of assay results from its 2011 Bayantsogt drill program, where 31 of the 35 drill holes intersected significant widths of iron mineralisation.
The results include 97 metres at 44% iron from 223 metres including 14 metres at 58% iron from 248 metres and 29 metres at 54% iron in hole BTDH-32 as well as 41 metres at 27% iron from 181 metres including 3 metres at 50% iron from 183 metres in BTDH-34.
Haranga said the mineralisation at Bayantsogt remains open in every direction including at depth and that the width and grade of the iron lodes generally increases at depth.
This includes a large, high grade core commencing approximately 150m vertical depth from the base of the Bayantsogt hill.
Selenge consists of five contiguous exploration licences covering a total of about 600 square kilometres.
A major plus for the project is some infrastructure is in place in the region, with the project having access to the main trans-Mongolian rail line and nearby rail spurs.
UPDATE 1-Thailand's Banpu raises 2012 coal output target (expects 1Mt production in Mongolia)
* Aims for 2012 coal output 47.7 mln tonnes, mostly from Indonesia
* Expects 2012 revenue up 15 pct on coal output, selling prices
* Aims to invest $1.75 bln during 2011-15
* Shares outperform in the past 3 months (Adds details of five-year investment, changes dateline)
HUA HIN, Thailand, Feb 24 (Reuters) - Banpu Pcl , Thailand's top coal miner, raised its coal output target to 47.7 million tonnes to reflect higher production from its operations in Australia and Mongolia this year, when it is aiming for revenue growth of 15 percent.
Banpu, which earlier projected coal output of 46 million tonnes, expected 1 million tonnes production from Mongolia this year, Chief Executive Chanin Vongkusolkij told reporters.
"We have to adjust the new number to include output from Mongolia," Chanin said.
Of the 47.7 million, 27 million would come from its Indonesian mines, 16.7 million from Australian mines and 3 million from China.
Through its Indo Tambangraya Megah, Banpu owns five mines in Indonesia, the largest revenue contributor. It also has 10 mines in Australia after the acquisition of Centennial Coal and two in China.
It acquired Mongolia-focused Australian coal explorer Hunnu Coal Ltd late last year and expected to start commercial run in the next few years.
Banpu, Southeast Asia's fourth-biggest coal miner, has been looking for an opportunity to buy assets overseas to boost its output and earnings growth and Chanin said Banpu would focus on buying coal assets in Indonesia.
In 2015, the company aimed to boost its output to 60 million tonnes, of which 30 million will come from Indonesia, 20 million from Australia, and 5 million each from China and Mongolia, Chanin said.
The coal miner, which maintained its 2012 investment budget of $600 million, planned to spend $1.75 billion during 2011-2015, which included $600 million for its Australian business and $400 million for its mines in Mongolia, he said.
Banpu aimed for revenue of 130 billion baht ($4.28 billion) this year due to higher coal output and selling prices, which are expected to be more than the $97.06 per tonne in 2011.
The company is expected to post revenue as high as 133 billion baht for 2012, according to Thomson Reuters I/B/E/S.
On Thursday, Banpu reported a 19 percent fall in 2011 net profit to 20 billion baht ($657 million) on coal sales of 39.57 million tonnes
Banpu shares have risen almost 20 percent in the past three months, outperforming a 16 percent gain of the main index .
On Friday, the stock was closed down 1.2 percent, underperforming a 0.5 percent rise in the broad index.
Tavan Tolgoi Still Aims for June Listing
February 23 (WSJ) Mongolia state-owned Erdenes-Tavan Tolgoi Co.'s multiple stock-market debut, still awaiting a needed waiver from Hong Kong, may have to be put off until autumn, a Mongolian official said Thursday—but the company is still "very keen" to list by June, when parliamentary elections are scheduled.
The mining company plans to list simultaneously in Hong Kong, Ulan Bator and London, seeking to raise at least US$1.5 billion and possibly as much as $3 billion.
Earlier this year people familiar with the situation said the plan for listing in Hong Kong simultaneously with London and Ulan Bator was shelved because the Hong Kong exchange was unlikely to make special dispensation for a Mongolian-incorporated company to list. Unlike China, Italy and the U.K., Mongolia isn't on the list of more than 20 jurisdictions in which companies listing in Hong Kong can be incorporated.
"Listing in Hong Kong is still on our radar," the Mongolian official said. "Our Financial Regulation Committee will meet the Hong Kong Securities and Futures Commission very soon to sort out the issues such as Hong Kong recognizing the listing of a Mongolian-registered company."
Erdenes-Tavan Tolgoi controls the world's largest deposit of coking coal, needed to make steel, in the South Gobi desert near China's northern border. Mongolia's government plans to hold a 51% stake after the listing, with global investors holding 19% and Mongolian citizens and companies the rest. The government intends to distribute a 20% stake to citizens for free and sell the remaining 10% to local companies at a discount.
It seems a somewhat problematic plan, given that many Mongolians don't have brokerage—or even bank—accounts. But the official said Thursday that citizens will be allowed to return shares to the state, which will then offer them for sale to domestic companies, with the funds raised returned to the citizens.
"This return of shares is also an issue that is being discussed with the authorities in Hong Kong," the official said.
Mark Dickens, head of listing at Hong Kong stock-exchange operator Hong Kong Exchanges & Clearing Ltd., declined to comment on Tavan Tolgoi's plans or the waiver decision—except that such decisions are made "at the appropriate time and on a case-by-case basis, depending on the quality of each individual company."
He did add, though, that HKEx is "keen to work with the Mongolian regulators to facilitate the listing of Mongolian issuers in Hong Kong."
Hong Kong has made a priority of attracting mining companies to its exchange, changing rules in 2010 to make it easier for them to raise capital for existing discoveries. Mongolian Mining Corp., which operates an adjacent deposit to Erdenes-TT, raised US$650 million in Hong Kong two years ago.
If Tavan Tolgoi's listing brings in US$3 billion, that would put the value of the company at more than $15 billion; the market capitalization of Ulan Bator's entire stock exchange is about $2 billion.
A Tavan Tolgoi IPO would be one of the biggest in Hong Kong this year. Other huge deals set for 2012 are the US$6 billion IPO by People's Insurance Co. (Group) of China Ltd., a state-owned property insurer; and the US$5 billion float of China Guangfa Bank, a provincial bank 20% owned by Citigroup.
Goldman Sachs Group Inc., Deutsche Bank AG, BNP Paribas SA and Macquarie Group Ltd. are handling the Tavan Tolgoi IPO.
Related:
Mongolia Tavan Tolgoi Still Aiming For Up To US$3 Billion Hong Kong,Ulan Bator,UK Listing – Official – The Financial, February 23
KCC last traded Thursday at 26c
Kincora Copper says latest drilling indicates Bronze Fox is very large deposit
February 21 (Proactive Investors) Kincora Copper (TSX-V:KCC) said today that latest drilling on its Bronze Fox project in Mongolia had indicated further evidence of a very large of copper and/or gold mineralisation.
Intersections in the drill core had demonstrated the potential for a high grade resource and had also identified new anomalies to expand the number of exploration targets, Kincora said.
Igor Kovarsky, president and chief executive, said nearly all of the holes intersected mineralisation, which he said was particularly encouraging as drilling took place over a significant area.
“The results revealed a number of targets along a significant strike. Furthermore I am excited with the addition of newly discovered gold zones and we look forward to expediting the 2012 exploration campaign," he added.
Between October and December 2011, Kincora drilled a further 2,400m for a total of 12,435m during the year across 23 holes.
Of these, 22 holes hit copper and/or gold mineralisation and 14 of these contained intersections of greater than 1g/t Au with the highest intersection hitting gold grade of 8.39g/t, Kincora said.
Bronze Fox is in the same geological neighbourhood as the giant Oyu Tolgoi mine, just over 100 miles to the north-east. Oyu Tolgoi is the world’s largest undeveloped copper deposit, which also contains an estimated 46 million ounces of gold.
Kincora said that highlights from the drilling included Dunlop Fox (hole F47), which had 6 separated 1m intervals with gold grade over 0.5g/t with the highest grade of 8.39g/t Au at 88m depth.
At Sophie North, 5 holes were drilled this year and 4 holes were previously drilled. All had gold mineralization; 3 of them contain greater than 1g/t Au (over intervals of 1-2m) with the highest grade of 2.48g/t (1m interval at 13m depth).
Buchanan Heights (hole F33) returned associated copper (Cu) mineralisation with the highest Cu grade of 1.88% Cu at 226m depth.
Last traded on February 15 at 20c
Undur Tolgoi Announces Commencement of Winter Work Program Over Mongolia Property
ULAANBAATAR, MONGOLIA--(Marketwire - Feb. 22, 2012) - Undur Tolgoi Minerals Inc. ("UTM" or the "Company") (CNSX:UTM) is pleased to announce the commencement of its winter work program as originally announced by the Company in its January 30, 2012 press release.
On February 18, 2012, the exploration team led by our senior geologist arrived on site to initiate the work program.
The team expects to deliver in excess of 1,500 soil samples to an accredited laboratory in Ulaanbaatar, Mongolia within the next few weeks. Results from the laboratory's sample analysis are expected by mid May 2012.
UTM's Chairman, Mr James Passin stated, "We are delighted with the rapid start on what promises to be a highly informative survey and analysis covering our entire property. This initial exploration phase will provide the Company with valuable information for our ongoing exploration of this large and potentially significant geological asset."
UTM is a mineral exploration company entirely focused on Mongolia, owning, through its wholly owned subsidiaries, 100% of the "Undur Tolgoi" mineral exploration license. This license consists of 9,620 hectares of property situated 100 kilometers from the world-scale "Oyu Tolgoi" copper and gold mine. In addition, UTM's management is actively reviewing potential acquisitions and strategic industry alliances.
Global Met Coal and Aspire Mining Limited Sign MOU For Coking Coal Projects in Ovoot Basin, Mongolia
VANCOUVER, Feb. 23, 2012 /CNW/ - Global Met Coal Corporation ("Global Met Coal") (TSX.V: GMZ) (FWB: B1H) announces that it has signed a binding Memorandum of Understanding ("MOU"), with Aspire Mining Limited ("Aspire Mining") (ASX:AKM), an Australian Securities Exchange listed company, to work together to mutual benefit in the pre-development, development and operation of the Mogoin Gol and Ovoot Coking Coal projects, located in the Ovoot Basin, northwest Mongolia.
Under the terms of the MOU, Global Met Coal has agreed to provide Aspire Mining with access to existing open pit mining operations at the Mogoin Gol Coking Coal project for the collection of information and bulk samples to be used by Aspire Mining in its prefeasibility-stage Ovoot Coking Coal Project which surrounds and adjoins the Mogoin Gol property. Aspire Mining will have access to all historical coal quality data produced as a result of coal sales from the Mogoin Gol Coking Coal Mine and bulk samples of suitable coal quality for test work purposes, including washability and coke oven test work, and for market development purposes.
Aspire Mining will make available to Global Met Coal the results of any test work and market development activities completed using coal from the Mogoin Gol pit and all information from Aspire Mining's geotechnical studies that is of direct relevance to the operation of the Mogoin Gol Coking Coal project. A National Instrument 43-101 Technical Report on the Mogoin Gol Coking Coal Deposit prepared by SRK Consulting (UK) Limited, dated December 23, 2011, and submitted to the TSX Venture Exchange, confirms that the Mogoin Gol Coking Coal Deposit is the same coal seam that runs across Aspire Mining's adjoining Ovoot Coking Coal Project.
Global Met Coal and Aspire Mining have also agreed to cooperate to achieve the following potentially mutually beneficial outcomes:
· The ability to mine coal up to the shared tenement boundary
· The rationalization/sharing of infrastructure
· The rationalization/sharing of mining fleet, and
· The use of a single mining entity/contractor
In 2010, Aspire announced an initial 330.7 million tonne JORC compliant Resource (93.3mt Measured, 182.4mtIndicated, and 55.0mt Inferred) for the Ovoot Coking Coal Project. In 2011, leading coal market consultants Wood Mackenzie, confirmed coking coal from Aspire's Ovoot Project had highly attractive properties and would easily meet the global seaborne market requirements. Wood Mackenzie's report described Ovoot coal as "A strongly caking, hard coking coal with superior blend capacity", and that hard coking coal would be an appropriate price benchmark. Aspire is currently targeting resource upgrades at the Ovoot Project, as well as progressing development of key infrastructure including access to rail.
Global Met Coal signed a letter of intent with Mogoin Gol Energy LLC ("MG Energy"), dated October 20, 2011 ("LOI"), to purchase a strategic interest in the Mogoin Gol Coking Coal Mine subject to the completion of due diligence and acceptance of the TSX Venture Exchange.
Further to the news release dated September 21, 2011 announcing the letter of intent related to the purchase by Global Met Coal of the coal project located in Jefferson County, Alabama, the vendors of the coal project have granted Global Met Coal an extension to April 30, 2012 to complete its drilling and due diligence investigations. Closing of the acquisition of the Alabama coal project is subject to the fulfillment of conditions including due diligence being satisfactory to Global Met Coal, the signing of a formal agreement by the parties, and acceptance of the TSX Venture Exchange.
In connection with the proposed acquisition of the metallurgical coal projects in Mongolia and Alabama, Global Met Coal has agreed to pay finder's fees payable in cash or by the issuance of shares having a deemed price of $0.15 per share or a combination of both, subject to acceptance of the TSX Venture Exchange.
ABOUT GLOBAL MET COAL
Global Met Coal Corporation is an exploration and development company focused on the acquisition of advanced stage properties with an emphasis on strategically located metallurgical coal projects. The Company has a Letter of Intent to acquire up to 35% interest in Mogoin Gol JSC which owns the Mogoin Gol Coking Coal Mine in the Ovoot Basin of northwest Mongolia. The Company also has a Letter of Intent to purchase surface and mining rights to 400 acres in Jefferson County, Alabama. The Company is evaluating additional met coal projects in Mongolia, North America and Australia. The Company trades on the TSX Venture Exchange under the symbol "GMZ" and on theFrankfurt Stock Exchange under the symbol "B1H".
PCY closed flat at C$0.495
Eurasia: PROPHECY COAL CORP. TO COMPLEMENT OBSOLETE POWER PLANTS IN MONGOLIA
February 20 (Eurasia Capital) --
Significant Progress with Chandgana Power Plant. In November 2011, the company received a power plant licence from the Mongolian Energy Regulatory Authority. In January 2012, Prophecy Coal Corp. (PCY) announced a positive feasibility study for the Company's 600 MW Chandgana Mine-Mouth Power Project in Central Mongolia. The feasibility study states that based on a 70%-30% debt to equity capital structure and discount rate of 12%, the project generates post-tax NPV of US$364.7mn.
The company expects to conclude a Power Purchase Agreement (PPA) with Mongolian authorities and sign EPC contract in 2Q 2012. We believe that once PPA and EPC contracts are in place, the company will be in a strong position to secure long term project financing for power plant construction that is expected to commence in the beginning of 2013. PCY is planning a two-phase development, where second phase will seek to add significant power capacity to supply electricity to Chinese market.
Strong Growth Potential. We expect the company to post positive net income in 2015 and subsequently demonstrate significant growth in both revenue and net income numbers. In 2018, the company is planning to generate 3.2mn MWh of power and produce close to 4Mt of coal from its Chandgana and Ulaan Ovoo coal deposits generating healthy profit margins for the company. Coal from Chandaga will be sold to the power plant with roughly US$5/t margin, while Ulaan Ovoo’s coal will be shipped to Russian buyers through Zheltura border crossing, 15 km to the north from the mine, with about US$5-6/t margin.
Low Cost Operations. PCY’s coal assets have one of the lowest strip ratios hence one of the lowest production costs in Mongolia and globally. The Ulaan Ovoo property hosts a single massive coal seam of 45-80 m thick with an average strip ratio of 2:1. With expected pre-tax mining cash cost of US$17/t at Ulaan Ovoo and selling price of $25/t, based on an owner operated model, PCY will be able to realize strong margins and successfully compete in the region. No washing and preparation plant is required for the first 20Mt. The Chandgana coal deposit has strip ratio of 0.5:1 resulting in a production cost of about US$10.5/t.
We reiterate our BUY rating with a 12-month target price of C$1.25/share. The market is not pricing in value of PCY’s power plant project and coal deposits with over 1Bt of high quality coal resources. PCY’s net asset value, after stripping out the company’s 42% stake worth US$87.7mn in Prophecy Platinum, is currently valued at US$3mn. This does not include PCY’s power plant project and coal assets’ net present value. Our NAV estimate for the company’s assets is US$317.7mn or US$1.33 per share representing over 175% upside to current share price of C$0.475 (17.02.2012). The company’s NAV estimate is based on 50% of power plant’s project NPV (US$182.4mn), coal assets NPV (US$74.9mn) and investment portfolio’s market value (US$92mn). We set the 12-months target price atC$1.25 which represents over 163% upside to current PCY’s share price. We expect numerous stock price catalysts in 2012 including signing power purchase agreement, EPC contract and securing project financing for power plant construction.
Centerra Gold achieves $1 billion revenue milestone in 2011
Centerra's 2011 gold production declined 5%, but net earnings for the year were up on 27% lift in the gold price received. CEO predicts cash costs of $465-500/oz in 2012.
RENO, February 24 (MINEWEB) - Centerra Gold (TSX:CG) Thursday reported 2011 gold production was within the company's guidance at 642,380 ounces, but dropped 5% from the 678,941 ounces mined in 2010.
The decrease was attributed to lower production at Boroo, which plunged 47% "as a result of lower head grades and recoveries processed through the mill. Mining ceased at Boroo last year , but resumed in January 2012.
Consolidated gold production for the fourth-quarter of 2011 totaled 151,562 ounces at a total cash cost of $603/oz, down from 249,866 ounces at a total cash cost of $308 per ounce in the same quarter of 2010.
As of Dec. 31, 2011, Centerra reported 8.1 million ounces in proven and probable gold reserves, which represents a 9% increase before accounting for 793,000 contained ounces processed at Kumtor and Boroo during 2011. Centerra measured and indicated resources increased by 36% or 1.8 million ounces to total 6.7 million ounces of contained gold, compared to 4.9 million ounces at the end of 2010.
Centerra CEO Steven Lang said, "For 2012, consolidated gold production is expected to be in the 630,000 to 685,000 ounce range and total cash costs are expected in the $465 to $500 per ounce range."
Net earnings for 2011 were $370.9 million or $1.57 per share, up from $322.3 million or $1.37 per share in 2010. The increase reflects a 27% increase in the realized gold price in the year, and settlements of $14.1 million with the Kyrgyz Social Fund and $2.6 million with the Mongolian government and the contribution of $10 million to the Kyrgyz government for schools in the country.
Nevertheless, Centerra reported its achieved the milestone of $1 billion in revenue last year.
Exploration expenditures in 2011 were $39.6 million, reflecting higher spending in Mongolia and an increase in exploration activities elsewhere.
Capital expenditures total $187.9 million for 2011.
For the fourth-quarter 2011 Centerra reported net earnings of $79.4 million or 34-cents per share, down from net earnings of $150.8 million or 64-centers per share for the same quarter of 2010, due to lower gold sales in 4Q11.
Related: Centerra considers joining quarterly dividend-paying peers – Mining Weekly, February 24
2011 Management's Discussion and Analysis and the Audited Financial Statements and Notes
Ivanhoe Mines CEO Robert Friedland a Keynote Speaker At International Mining Conference in Florida on February 27
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 22, 2012) - Robert Friedland, founder and Chief Executive Officer of Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN), will be the keynote luncheon speaker at the BMO Capital Markets Global Metals & Mining Conference on Monday February 27, 2012, in Hollywood, Florida.
Mr. Friedland's keynote presentation, and a separate presentation on behalf of Ivanhoe Mines, will include a perspective on projected trends in global metals markets, an update on the rapid progress that is being made toward the start later this year of first copper-gold-silver production at the Oyu Tolgoi mining complex in southern Mongolia, production developments at Ivanhoe's subsidiaries and value-building initiatives.
A Battle for Mongolia's Copper Lode
Billionaire Friedland on Defensive as Rio Tinto Grabs Controlling Stake in His Ivanhoe Mines
February 22 (WSJ) TORONTO—Billionaire entrepreneur Robert Friedland built his fortune learning how to gain advantage over some of the world's largest and most powerful mining companies.
Today Mr. Friedland is finding that dealing with giants can be tricky sport.
At issue is ownership of resources buried deep in the Mongolian desert that are among the world's largest unexploited gold and copper deposits—a development with estimated reserves of 81 billion pounds of copper and 46 million ounces of gold.
Mr. Friedland, the chief executive of Ivanhoe Mines Ltd. and one of the sector's most colorful moguls, is on the back foot in a squabble with industry giant Rio Tinto PLC over Oyu Tolgoi, Ivanhoe's massive copper-and-gold project in Mongolia.
Last month, Rio Tinto increased its ownership in Ivanhoe to 51%, a stake that gives it effective control of the Canadian miner without having paid a premium to other shareholders—a move that Ivanhoe CEO and founder Mr. Friedland had fought to prevent.
Now in charge, Rio wants to hold on to Oyu Tolgoi but spin off or sell Ivanhoe's other mining assets, according to people familiar with the matter.
One of the people said, however, that Rio is in no hurry to make such a move. For a start, the Oyu Tolgoi project still has to overcome some key hurdles, including the conclusion of power-supply negotiations with Chinese authorities.
The intentions of Mr. Friedland, who holds a 13.7% stake in Ivanhoe, are less clear. According to people familiar with the matter, he is now looking to negotiate with Rio over an exit for himself and Ivanhoe's other shareholders.
If Mr. Friedland wanted to, he could also hold on to the bitter end. Canadian rules require a potential acquirer to own over 90% of a company's shares before forcing a full takeover, which Rio would be unable to do if Mr. Friedland maintains his current stake.
The self-made, 61-year-old billionaire has a colorful past that takes in student activism against the Vietnam War, a youthful friendship with late Apple Inc. co-founder Steve Jobs and some of the sector's potentially most-lucrative discoveries in recent decades. It has also included controversial forays such as Ivanhoe's past venture in military-run Myanmar.
Mr. Friedland, who currently spends much of his time in Singapore, declined to comment for this article. An Ivanhoe spokesman said Rio's "slim" 51% controlling interest "has not curtailed Mr. Friedland's long-standing and active service to Ivanhoe Mines."
The Ivanhoe spokesman said the company's future is for all the company's shareholders to decide, not just Rio and Mr. Friedland. The company is based in Vancouver and listed in Toronto and New York.
Mr. Friedland, who spent much of the 1970s traveling in India, where he studied Sanskrit, Hindu culture and Buddhism, once said he became interested in mining after stumbling upon an abandoned gold mine on property he was developing for a timber venture with Mr. Jobs, whom he met at Reed College in Portland, Ore., in the early 1970s.
Mr. Friedland came to prominence in the 1990s with a large Canadian nickel-deposit find. Through another company he controlled at the time, Diamond Fields Resources Inc., he sold that off to Canada's Inco Ltd. for about $3 billion, after stoking a bidding war.
Then in 2000, Mr. Friedland and Ivanhoe, a company he founded in the mid-1990s, paid $5 million to another mining giant, BHP Billiton PLC, to buy Mongolian exploration licenses. That was followed by a related $37 million payment three years later to acquire a right to some royalties BHP retained.
After exploring the prospect, Ivanhoe now is sitting on gold and copper that analysts say could be worth some $300 billion.
"You have to take your hat off to Ivanhoe—they invested a lot of effort into an area that had no history of major discoveries," said Terry Ortslan, a director at mining research firm TSO & Associates.
Lacking the firepower to develop Oyu Tolgoi on its own, Ivanhoe invited in another mining behemoth, London-listed Rio, which in 2006 took a 9.95% stake for $303 million. Since, Rio has invested over $4 billion to get to its current 51% stake, according to Ivanhoe.
But as Rio continued to build its ownership, analysts say the relationship frayed. In 2010, Ivanhoe adopted a shareholder-rights plan that allowed other investors to dilute Rio's stake if it continued to grow.
Last year, Rio challenged this clause in arbitration, and Ivanhoe abandoned the plan, clearing the way for Rio to go above 50%. Rio made that move on Jan. 24, without informing Ivanhoe, according to a person familiar with the situation. A Rio spokesperson declined to comment.
Rio now has a number of options, analysts say. One is simply trying to install new board members and management and then selling off the non-Mongolian assets piecemeal.
The company could also strike a friendly deal with minority shareholders by spinning off the non-Mongolian assets, plus cash, to investors, the scenario analysts such as those at Credit Suisse AG see as most likely.
Credit Suisse estimated in a recent report that around three quarters of Ivanhoe's net asset value is based on its holding in Oyu Tolgoi, which it values at $13.3 billion.
The rest of the company is worth around $3.4 billion, the bank figures. Those other assets include stakes in a gold project in Kazakhstan and a coal mine in Mongolia.
Mr. Friedland has been hit by setbacks before but is upbeat by nature, say some who know him. Some of his early mining promotions didn't make investors money, but Mr. Friedland was always able to drum up interest in new ventures. Ivanhoe's early days in Mongolia saw setbacks, including a local protest in which an effigy of Mr. Friedland in a top hat was burnt in the capital Ulaanbaatar.
Mr. Friedland has also proven controversial.
Ivanhoe once entered into a joint venture with a state-owned mining company in military-ruled Myanmar. Ivanhoe says the copper project, which it exited in 2007, brought investment into a developing country and was started before Canada placed sanctions on the regime.
Bank of America Analysts Now Covering Ivanhoe Mines Ltd Stock (IVN)
February 21 (Web Inquirer) Analysts at Bank of America (NYSE: BAC) started coverage on shares of Ivanhoe Mines Ltd (NYSE: IVN) in a research report issued to clients and investors on Tuesday. They set a “buy” rating on the stock.
Separately, analysts at TD Securities downgraded shares of Ivanhoe Mines Ltd from a “buy” rating to a “hold” rating in a research note to investors on Tuesday, December 13rd.
Ivanhoe Mines Ltd. (IVN) is an international mineral exploration and development company. The Company’s principal mineral resource property is the Oyu Tolgoi Project, located in Mongolia. The Company also has two subsidiaries, through which it holds interests in coal resource properties in Mongolia, and molybdenum, rhenium, copper, gold and uranium resource properties in Australia. Its subsidiary, SouthGobi Energy Resources Ltd. (SGQ), owns and operates the Ovoot Tolgoi Coal Project located in Mongolia. The Company’s subsidiary, Ivanhoe Australia Limited (Ivanhoe Australia), owns the Cloncurry Project located in Queensland, Australia. IVN also holds interests in several other mineral resource projects in Asia, including a 50% interest in the Kyzyl Shear Project, located in Kazakhstan, through a shareholding in Altynalmas Gold Ltd. (Altynalmas Gold).
Shares of Ivanhoe Mines Ltd traded up 0.85% during mid-day trading on Tuesday, hitting $16.70. Ivanhoe Mines Ltd has a one year low of $12.11 and a one year high of $29.05. The stock’s 50-day moving average is $17.63 and its 200-day moving average is $18.88. The company’s market cap is $12.340 billion.
Morgan Stanley holds 8.19% in Origo Partners
February 23, Origo Partners Plc (OPP:LN) --
The Company yesterday received notification that, as at 20 February 2012, Morgan Stanley Securities Limited ("MSSL"), holds 29,500,000 ordinary shares in the Company, representing 8.19% of the issued share capital.
MRC: Remuneration Report Resolution Defeated at AGM
February 21, Mongolian Resource Corporation Limited (ASX:MUB) --
MRC: Managing Director’s AGM Presentation
February 21, Mongolian Resource Corporation Limited (ASX:MUB) --
Guildford Coal Half Year Report
February 22, Guildford Coal Limited (ASX:GUF) --
Cash at end of January A$867.3K
Robe: Monthly Report
February 21, Robe Australia Limited (ASX:ROB) --
Aberdeen International Reports Value of Investment Portfolio and Cash of $1.08 Per Share for Fiscal 2012 Year End (January 31, 2012)
TORONTO, ONTARIO--(Marketwire - Feb. 21, 2012) - ABERDEEN INTERNATIONAL INC. ("Aberdeen", or the "Company") (TSX:AAB) today announces that the value of its investment portfolio as at January 31, 2012, the end of its 2012 fourth fiscal quarter, was approximately $92.9 million including a cash balance of $7.5 million. This equates to a value of $1.08 per share based on Aberdeen's investment portfolio alone and does not include the value of its gold royalties. This report of the portfolio value is not equivalent to the "Net Asset Value" or "NAV" that has been previously reported by Aberdeen as it does not include assets and liabilities of the Company that are not treated as investments. Rather, this report refers only to the cash, equity investments (private and public), option-type investments (e.g. warrants) and corporate debt/loans receivable of the Company. Aberdeen expects to report its audited full year end financial results during the week of April 23, 2012.
The value of the investment portfolio decreased from the third quarter results for the period ending October 31, 2010 by approximately $7.2 million or 7.2% (or 6.4% decrease in per share value after factoring in shares cancelled during Q4). For the year, Aberdeen's portfolio decreased by $33.4 million or 26.4%.
…
Outlook
David Stein, Aberdeen's President and COO, commented, "After enjoying a record year last year (2011-2012), we experienced a forceful consolidation in the markets and indeed our portfolio. While our business model does not really rely on short-term performance, it is worth noting our portfolio outperformed the TSX Venture Index during this very tough year. We decided to completely exit positions in Avion Gold Corporation and Crocodile Gold Corp. in our fiscal 2012, which we deemed to be maturing. Aberdeen maintains a strategic stake in Sulliden Gold Corporation Ltd. (TSX:SUE) ("Sulliden"), which remains its largest holding. As disclosed by Sulliden, Sulliden is anticipating to report on an updated resource estimate and feasibility study in the second quarter of 2012.
Also of note in our portfolio is a reduction in corporate debt held due to repayments and conversions that have occurred. The largest of which, is a conversion of Temujin debt into equity as we prepare to sell the assets to other publicly traded companies for shares in order to maintain exposure to the longer-term growth potential of these exciting assets. The first such transaction was announced on January 16th with Kincora Copper (TSX VENTURE:KCC) and we look forward to a long partnership with this very well-run Mongolia-based exploration company.
…
Mongolian Mining receives Mongolia Highest National Accolade for Excellence in Development
February 24 (SteelGuru) Mongolian Mining Corporation announced that MMC has received Mongolia's highest accolade for excellence in development and productivity "State Gerege" from the President of Mongolia Mr Elbegdorj Tsakhia on February 21st 2012, the Eve of Mongolian Lunar New Year. The State Gerege ("Gerege" is an ancient passport that denoted authority and entitled Mongol officials to receive high services across the Mongolian empire), the nation's highest honor, is awarded in recognition of a single outstanding achievement in a given year which represents a pioneering and meritorious contribution to the social and economic development or the national interests of Mongolia.
By integrating the best international practices into the domestic mining sector of Mongolia, the Company's Ukhaa Khudag mining complex has showcased immense growth over the past three years and has made a significant contribution in leveraging Mongolia as one of the largest coal suppliers in the world.
The highest national recognition for development excellence -- "State Gerege" was launched in 2010 as part of the President of Mongolia's effort to enhance development standards and promote culture of innovation and creativity across the country.
Mr Elbegdorj Tsakhia president of Mongolia at the award ceremony said that "An international standard mining and industrial complex was developed at Ukhaa Khudag within a short period of time thanks to the collaborative effort and hard work of thousands of Mongolians, including dedicated managers, skilled engineers and workers. I see the Ukhaa Khudag project development as a major achievement that exemplifies the economic activities and emerging project undertakings in Mongolia. I would like to wish success, prosperity and all the very best to everyone who have been involved in this outstanding development work."
LDI closed +14.58% to C$0.275
Landdrill reports record commitments for 2012 from miners in Canada, abroad (demand in Mongolia remains high)
MONCTON, N.B., February 20 (The Canadian Press) - Landdrill International Inc. (TSXV:LDI) announced Monday that it has secured "record drilling commitments" from mining companies in Canada and internationally for 2012.
The value of the contracts was not disclosed by the New Brunswick-based contract driller.
However, president and CEO Ron Goguen Sr. said the new contracts "demonstrate the continued growth strategy of the company."
"The acquisition of drills during 2011 has permitted the company to increase its market share," Goguen added.
Landdrill said it has contracts with Canadian base metal and precious metal mining companies for drilling totalling more than 300,000 metres in Quebec, Ontario and Labrador.
The projects will require the use of 18 of the company's Canadian-based drills and represents an additional 100,000 metres booked compared with Feb. 20, 2011.
The company's Mexican operations also appear poised for record growth in 2012, Landdrill said. Mexican contractual commitments to date for 2012 exceed 200,000 metres.
Meanwhile, the company says demand in Mongolia remains high and further commitments are expected in the near future.
"We anticipate that these commitments will represent an increase in revenues from our Mongolian branch over 2011," the company said.
BNP Paribas pioneers Mongolia custody market
BNP Paribas Securities Services has become the first global custodian to support foreign investment into Mongolia, a market that is booming thanks to commodities but has until now had no concept of custody.
February 23 (Financial News) The custodian has been chosen by Harvest Global Investments to provide global custody, fund administration and transfer agency services for its Asian Frontier Equity Fund.
Harvest, China’s second-largest asset manager with $37bn in assets under management, launched the fund last year and has been investing in Mongolia – becoming both the first Chinese and the first cross-border manager to take direct investment exposure in the country.
According to the Asian Development Bank’s economic outlook, GDP in Mongolia is expected to hit 8% this year.
Lawrence Au, head of Asia-Pacific at BNP Paribas Securities Services, told Financial News: “Currently there are a number of Mongolian companies listed in Hong Kong and other markets, but Harvest Global Investment wanted to invest directly in Mongolian companies.”
The custodian has developed an operating model that gives Harvest direct access to the market. It opened a trustee account at the Mongolian Securities Clearing House and Central Depositary, ring-fencing and protecting Harvest’s assets.
However, Au said the custodian faced challenges along the way. He said: “Mongolia is a frontier market. Although there is a stock exchange there is no concept of custody at all, so we couldn’t put this mandate into our sub-custodian network. There are also no established messaging standards, so we had to consider other alternatives. The stock exchange was officially established in 1991, but its processes are still in infancy. There are currently only a dozen stocks listed on the exchange.”
Au said the custodian has also been invited into a working group to advise on aligning the market’s settlement system with international processes. He said: “The market is booming because of commodities and mining, and there is a lot of interest in terms of fund investment coming into Mongolia. This will give more options to investors than just private equity.”
Harvest, BNP Paribas launch fund investing in Mongolia
February 23 (The Asset) BNP Paribas Securities Services has launched an emerging market fund investing in Mongolia following a mandate from Harvest Global Investments. This marks the first time a Chinese and cross-border asset manager has taken direct investment exposure in the country, as well as the first time a global custodian has supported foreign investments there.
Andrew Tan, deputy CIO of Harvest, China’s second largest asset manager with USD37 billion in assets under management (AUM), says that “this fund is part of an entire frontier market strategy for the group.” The fund went live in late 2011 and has since been investing in Mongolia through equities listed on the local stock exchange. Its current size is about USD20 million.
He states that Harvest’s major investment themes in the frontier market are consumption (60 percent to 80 percent), commodities (20 percent to 30 percent), and infrastructure (10 percent). With favorable demographics, Tan anticipates that “we will have 300 million new consumers in the coming years.” Pair this with high return on equity (ROE) and a low price-to-earnings (PE) ratio, and the country presents a compelling buying opportunity for Harvest. He also adds that because of Mongolia’s low correlation to other equity markets (US, UK, Japan, Hong Kong) these investments will be good for diversification.
Tan is, however, mindful of the fact that as a frontier market, Mongolia has more than a few risks. Harvest mitigates this by avoiding high regulation industries such as banks and real estate and focussing on stocks owned or run by multinational companies.
Lawrence Au, head of BNP Paribas Securities Services in Asia-Pacific, shares that Mongolia came with a unique set of challenges, with no concept of a local sub-custodian and asset servicing still in its infancy. They had to create an innovative “account operator” model which would allow them to collaborate with local brokers and market participants to monitor foreign exchange and money movements, facilitate securities settlement, obtain securities reports straight from the exchange, and create a partnership with local brokers to assist in the translation of key information.
“Mongolia is an exciting frontier market whose economy is forecast to grow by eight percent this year [according to ADB], and we are pleased to be the first and currently the only global custodian able to have direct access to the Mongolian market,” Au comments.
Related: Harvest sees growth in frontier market consumption – Investment & Pensions Asia, February 24
Coal export occupies 31 percent of total export (copper concentrate 27.8%, iron ore 15.7%, oil 8.1%)
February 21 (news.mn) According to Mongol Bank statistics, foreign trade turnover of Mongolia has reached USD735.2 million in the end of January and it has grown by 32 percent in comparison of January, 2011.
42.1 percent of total goods circulation or commerce of USD309.4 million has been dealt with China and 23.9 percent of goods circulation or commerce of USD175.5 million has been dealt with Russia.
Total export balance of trade has grown by 15.2 percent in comparison of January, 2011 and import balance of trade has grown by 42.1 percent. Import growth has influenced to foreign trade deficit that has been accounted USD254.6 million.
Coal export has occupied 31.2 percent of total export and Mongolia has exported 21 million tons of coal to China. Also copper enrichment export has occupied 27.8 percent, iron ore 15.7 percent and crude oil 8.1 percent of total export.
Main export goods’ border prices have been increased by 11.8 percent and import goods’ prices have been increased by 49.1 percent. Export and import prices’ increases have influenced to foreign trade total goods circulation growth.
Todd Baer Named Executive Producer for Bloomberg TV Mongolia
Baer to lead creation of locally produced, local language content
HONG KONG, February 22 (Bloomberg) – Todd Baer has joined Bloomberg as Executive Producer for Bloomberg TV Mongolia, announced Parry Ravindranathan, Business Head for Bloomberg Television in Asia.
Baer will lead the creation of locally produced, local language content for Bloomberg TV Mongolia. The network, headquartered in Ulan Bator, is scheduled to launch in April 2012 in partnership with The Trade & Development Bank of Mongolia (TDB).
Baer brings over 14 years of experience as an Emmy Award-winning journalist and television news trainer in markets around the world, including India and Pakistan. He served as a correspondent for Al Jazeera English in India, the Middle East, Afghanistan and the Americas, and previously reported for CNN and U.S.-based ABC News. In his role as a television news trainer, Baer has consulted for Dawn News, GEO News and Dunya News in Pakistan, K24 News in Kenya and Aaj Tak and SAAM-Marathi in India. Baer joins Bloomberg TV Mongolia from his role as a Knight International Journalism Fellow based in Delhi, India.
“Todd has a proven track record in a start-up environment, including helping build three prominent news channels in India,” said Ravindranathan. “We’re pleased to bring Todd’s journalism expertise to Bloomberg TV Mongolia, as we expand our brand in this important region.”
“I’m looking forward to leading our coverage of one of the fastest-growing stock markets and investing environments in Asia,” said Baer. “This is an important time to bring high- quality, credible business and financial news to business leaders and investors in Mongolia.”
Mongolia seeks business tieups (with Japan)
ULAN, Bator, February 22 (Kyodo) — Mongolian Prime Minister Sukhbaataryn Batbold has called for boosting economic cooperation with Japan in the areas of nuclear energy and development of natural resources such as rare earth minerals.
Batbold said he plans to visit Japan in March and expressed eagerness to forge cooperation with Japan as Mongolia, rich in uranium reserves, plans to build its first nuclear power plant.
"Japan possesses high technology in the peaceful use of nuclear power and has lessons from Fukushima," he said, referring to efforts to recover from the crisis at the Fukushima No. 1 power plant in the wake of last March's massive quake and tsunami.
The two governments are arranging a trip by Batbold to Japan from March 10 to 15.
Government passes apartment loans at six percent interests
February 21 (news.mn) The Government meeting was convened on Monday and the members ratified a protocol of apartment loans at six percent interests relating to implementation of 100,000 housing.
The meeting asked Representative Managing Council of Development Bank to organize apartment loans granting to citizens with commercial banks along rules to use commercial banks’ sources until issuing bond of DB.
Finance Minister D.Khayankhyarvaa has been asked to decide apartment loan interests difference that citizens have borrowed apartment loan higher than six percent interests, focus on compensation of loan interests difference to 2013 budget proposal, account bond and interests payment. Also Deputy Prime Minister and Chief of National Committee M.Enkhbold has been asked to monitor loan granting and the protocol implementing.
Prime Minister S.Batbold estimated the Ministers of Finance and of Road, Transportation and Urban Development for their active work and organization of the apartment loans’ issue. He also noted that goals to house citizens have now become work and citizens could decide apartment purchase without financial difficulties.
According to statistics, commercial banks have lent MNT485.4 billion for 15,000 households for apartment purchase in 2011.
The Government meeting also passed “National Program for Mongol Studies Development”. The program has aimed to develop Mongol studies, regulate correlation between Mongol studies’ sectors, intensify Mongolia’s participation to prepare young researchers’ generation abroad, and keep Mongolia’s position to be a center of Mongol Studies.
Education, Culture and Science Minister Yo.Otgonbayar has been asked to pass program plan and monitor the program implementation. Needed capital for the program would be financed by the minister’s budget.
Taming the Winds of Mongolia
A REGIONAL RENEWABLE POWERHOUSE
February 22 (Bayanjargal Byambasaikhan (Newcom CEO) via energybiz) THE VAST MONGOLIAN STEPPE sits atop an elevated plateau in Central Asia in the heart of the north-Asian wind channel, resulting in world-class wind and renewable energy potential. Mix this potential with the lowest population density in the world - half of Mongolia's 2.7 million people live in the capital city of Ulaanbaatar - and a huge landmass nearly the area of Alaska and you have the perfect recipe for large-scale renewable energy generation.
Mongolia is estimated by the National Renewable Energy Laboratory to have good-to-excellent wind resources of over 2,550 terawatt-hours per year. When including moderate-level wind resources - or those suitable for rural power applications - this estimate increases to over 8,123 terawatt-hours per year.
The good-to-excellent level represents utility-scale development, with measurements at 30 meters and assuming 500-kilowatt turbines. For Mongolia, wind potential at utility scale runs from Class 3 to Class 6, with more than 130,000 square kilometers of land falling in the 6.4 to 7.1 meters-per-second range. The South Gobi region in Mongolia alone is estimated to have over 300,000 megawatts of wind electric potential.
Newcom Group, a leading Mongolian investment and asset management company, became a pioneer in Mongolian wind energy in 2004. Seeking to tap into this vast renewable resource potential, the company began its own site and resource analysis and started working with the government to create the right environment for investment. Because of these efforts, Mongolia's Renewable Energy Program was created in 2005 and the Mongolian Parliament adopted a Renewable Energy Law in 2007, setting out a framework for development of the industry and tariff methodologies.
Newcom Group negotiated the first power purchase agreement with the government. It set up a subsidiary, Clean Energy, which will build Mongolia's first wind farm, which will also be its first independent power producer and the first new-generation capacity added to the country's grid in almost 30 years.
Clean Energy's flagship project is the 50-megawatt Salkhit Wind Farm being developed about 70 kilometers southeast of Ulaanbaatar. Salkhit appropriately means "windy mountain" in Mongolian, and to see and feel the site, one immediately knows how it got its name and why it was chosen for Mongolia's first wind farm.
A supply agreement for the project's turbines and towers was signed with General Electric on Dec. 17 for the estimated $100 million project. With GE's Vice Chairman John Rice in attendance, GE and Newcom also announced that GE would be making a strategic investment in the project, thus raising the stakes and demonstrating its confidence in both the project and the potential for Mongolia to become a regional renewable energy powerhouse.
The Salkhit Wind Farm is expected to be fully commissioned by the end of 2012. At full operating capacity, it will be the third-largest power plant in the country and produce about 168.5 million kilowatt-hours of electricity, while avoiding 185,500 tons of CO2 emissions, and the use of 1.6 million tons of water and 150,000 tons of coal.
Newcom has also been collecting data for the last three years on 300,000 hectares of its property in the Gobi region. The firm is working to complete the technical and economic feasibility studies needed to build its next wind venture at 300 megawatts.
With a booming economy and energy-hungry neighbors across Asia, Mongolia is set to become the region's renewable energy powerhouse. The benefit of connecting this vast potential to this enormous demand is clear. Mongolia will take advantage of the cheapest, cleanest and safest energy opportunities and power a renewable energy future.
Marshaling the Winds of Mongolia
February 22 (NY Times Green Blog) Construction is to begin in March on Mongolia’s first wind farm, and its backers hope it will be the beginning of a renewable energy boom.
Mongolia’s first wind installation is a $120 million project that will provide 5 percent of the country’s electricity demand. Transmission lines were installed last year, while turbine construction waited out the fierce Mongolian winter. It is scheduled to begin in March.
The 50-megawatt installation will provide the first new power added to Mongolia’s grid since 1986 — when the population was 30 percent smaller — and it is the country’s first-ever private energy enterprise.
“The rest of the energy sector is all state owned. We are essentially breaking a monopoly,” said Bayanjargal Byambasaikhan, chief executive of the Mongolian investment firm Newcom, which holds a 75 percent share in the project. Until 1990, a Soviet-style communist party governed Mongolia.
The project could set off a sea change in the Mongolian – and possibly Asian – electricity mix. A recent Green blog article described Mongolia’s vast and heavily exploited coal reserves, but available renewable resources may be even more vast. This sparsely populated country has potential to generate 2.6 terawatts of renewable energy per year, according to recent data from the National Renewable Energy Laboratory in the United States and the National Renewable Energy Center of Mongolia.
This quantity constitutes about one-quarter of global electricity demand. “One of the best outcomes of the project is that people are aware of the potential,” Mr. Byambasaikhan said in a recent presentation at Yale.
Given the country’s location, Mr. Byambasaikhan is hoping to establish Mongolia as the hub of an Asian clean energy “supergrid” that supplies Russia, China, the Koreas and Japan. His first farm is being developed 40 miles southeast of Ulan Bator, Mongolia’s capital city, on Salkhit Uul, or appropriately, Wind Mountain.
Because this was the first project of its kind, requiring development of new legal and regulatory frameworks, the work took twice as long and was almost 40 percent more expensive than a comparable project in the United States. But Mr. Byambasaikhan said he was confident that operations will now run more smoothly and he hoped to expand wind capacity 20 times by 2025.
“People always explain to me that 80 percent of our territory is covered with coal,” said Mr. Byambasaikhan. “Well, yes, but 100 percent is covered with wind. I beat you on that one.”
James West of Midas Letter on Prophecy
The Who, What and Where of Energy Investing: James West
February 24, 2012 (Investorideas.com Energy Newswire) James West, publisher of the Midas Letter, asks himself three questions when considering energy investment opportunities: Who is the management? What is the asset mix? Where is the project located? He shares the names of companies in the oil, gas, uranium and lithium sectors that have all the right answers in this exclusive interview with The Energy Report.
The Energy Report: James, what percentage of the Midas Letter model portfolio consists of energy-related plays?
James West: Energy holdings represent 15% and I expect that to grow closer to about 20-25%.
…
Once I've evaluated a company's asset base, I look at the people behind the project. I look at capitalization and management's fundraising abilities because a lot of oil and gas plays are very expensive. If the company will be an operator, does management have operating experience?
Next, I look at location. Is the project in a politically tricky jurisdiction? The Niger Delta is somewhat of a hotspot now. Kurdistan is a bit problematic; Uzbekistan, Afghanistan-the -stans are always problematic. The elections in June make Mongolia a question mark right now.
…
TER: What about coal?
JW: Coal is like natural gas. I always ask: Where is it? What kind is it? Who are you going to sell it to?
The best coal story in terms of near-term depreciation is Prophecy Coal Corp. (PCY:TSX; PRPCF:OTCQX; 1P2:FSE). It has 1.4 billion tons at its Chandgana Ulaan Ovoo project. It has two coal mines in Mongolia. One is immediately south of the capital, Ulan Bator, where Prophecy has a permit to build a 600-megawatt power plant that will consume more than 2 million tons (Mt) of its coal annually. Called the Mine-Mouth Power Plant, it will be built right at the mine, and should be operational by 2016. The company is negotiating the power offtake agreement. According to its preliminary economic assessment (PEA), it has a good internal rate of return, but the exact numbers depend on what the power purchase agreement number is. It looks like it might be $0.06/kilowatt hour (KWh). The financing will be 70% through debt, 30% equity. Now, 70% debt is not what you'd call a done deal, but all of the Chinese and Mongolian players are ready to write checks.
TER: Prophecy is already producing coal. Will all of its coal go to the Mine-Mouth plant, or will it still export some?
JW: That is the beautiful thing about Prophecy, it has flexibility. It has an immediate project that will consume 2 Mt/day. It has a great offtake partner in itself. Essentially, it will sell the coal as electricity. It also has tons left over for export. It has exported some coal from its mine in Northern Mongolia to Russia, and that will likely increase in the future.
The company also owns 42% of Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE). Prophecy Platinum is a very liquid stock, last trading at more than $4. Basically, Prophecy Coal's entire market-cap value is in Prophecy Platinum shares. It is as if the power plant and the coal operation are a bonus for investors.
There is a discount because Mongolia is perceived as a bit flaky when it comes to deciding what to do with its natural resources. The Mongolian election in June adds some uncertainty. But the bottom line is that Mongolia is growing and it needs electric power. No matter who is elected, this plant will get built. The government will not steal it from Prophecy Coal because the government does not know how to run it and it lacks access to capital. China, its next-door neighbor, will make sure everything happens according to plan.
…
Mongolia: Hot property
February 24 (Oxford Business Group) The real estate market in Mongolia is expected to expand significantly in the coming years, thanks in part to increasing incomes and rapid urbanisation created by the country’s mineral wealth.
With the capital city expected to be home to more than half of the population by 2030, Ulaanbaatar will be the focus of this surge in real estate growth. There are several factors expected to lead people to leave traditional nomadic herding lifestyles and move to the city.
According to the World Bank, revenues from Tavan Tolgoi, a coking coal mine, and Oyu Tolgoi, a copper mine, are expected to propel real GDP growth from the current level of $7bn to $24bn in the next decade. GDP per capita, meanwhile, is expected to soar from $3000 to $8000 by 2016. The government has also pledged to increase the salaries of state workers by 53% in 2012.
To prepare for the expected influx of people into the city, the government is developing a “100,000 Apartments Programme” that will see 75,000 homes built in the city and 25,000 constructed in the countryside. In January, city officials also announced a series of projects aimed at improving Ulaanbaatar’s infrastructure, with MNT70bn ($51.28m) allocated for road repair and construction, MNT45.3bn ($33.19m) for public transportation and MNT330m ($241,758) for the construction of 40 kindergartens.
In September 2011, the US Agency for International Development and the Mongolian Mortgage Corporation announced a guarantee facility that will cover approximately $4m in mortgage-backed bonds, of which the US Treasury guaranteed 50%.
When speaking with the media in August 2011, Kh. Battulga, former minister of roads, construction, transportation and urban development, stated that the country’s Development Bank is backing the 100,000 Apartments Programme, adding that citizens with low and average incomes will be able to take part in the programme with 12-year loans at 4% a year. “It is estimated the project will cost MNT800bn ($586.08m),” he said.
According to data from the National Statistical Office released in May 2011, housing prices in Ulaanbaatar ranged from MNT850,000 ($623) per sq metre to MNT1.48m ($1084) per sq metre, while luxury apartment prices ranged from MNT2m ($1465) per sq metre to MNT10m ($7326) per sq metre.
“The high-end real estate market is displaying remarkable growth,” noted local real estate firm MAD Investment Solutions in its 2012 report. “Prices for [high-end residential] units ... nearly doubled from the first quarter of 2010 to the first quarter of 2011.”
MAD said some of the highest prices it has seen were among units in the city centre’s 40,000-apartment area, adding that the knowledge-based economy that is being created by the influx of international capital has resulted in an increase in demand for office space.
“Grade-A offices in the city experience high occupancy rates, typically over 85%, although new developments such as Blue Sky Tower are presently exhibiting higher vacancies – 10% or more. Over 73% of the total grade-A office supply in Ulaanbaatar is located within the Sükhbaatar district, at the heart of the central business district,” the report noted.
The expected influx of foreign workers, entrepreneurs and investors from major firms such as Rio Tinto, Ivanhoe Mines and Peabody Energy should also create an increase in demand for the hotel and serviced apartments segments.
Research firm R2 predicts there will be 130 serviced apartments available by 2013, but that this will expand once the Hong Kong-based Shangri-La Group opens its 273-room hotel, scheduled for the same year. Hyatt Regency Ulaanbaatar is also scheduled to open in 2014 with 259 rooms, including 43 suites and 22 serviced apartments.
Other areas expecting to see growth are towns located near the country’s vast mining projects. Indeed, the government announced in January 2012 that 3000 apartments, roads, a school, kindergarten, hospital, hotel and shopping centres will be built near Oyu Tolgoi, with the MNT100bn ($73.26m) project to be financed by Ivanhoe Mines, Rio Tinto and the state-run Tavan Tolgoi firm.
While Mongolia’s mineral wealth is generating unprecedented optimism in the country’s property sector, key infrastructure will need to be built at a parallel speed to new housing construction. If the government’s plans for infrastructure works continue on schedule, there should be plenty of opportunities in accommodations development.
Under-the-Radar Rare Earth Elements: James Passin
February 21 (The Critical Metals Report) --
The Critical Metals Report: It’s been over two years since you last spoke with us. How have macroeconomic events affected your investment strategy?
James Passin: I am not going to discuss specific investment strategies. But it’s interesting to take a careful look at the current environment, in which there remains a huge amount of fear regarding the solvency of the world financial system. At the same time, there’s clear evidence of growth returning to the USA and certain other regions, although interest rates are near zero and central banks continue to print money. So, I see a situation in which powerful opposing forces at are work, a situation which may continue to manifest itself in violent, short-term fluctuations in asset prices.
I think that the global risk appetite is in a recovery process and that this will gradually lead to more stable capital markets, which should, generally, be positive for equity valuations. But the fear of black swans has kept a lot of cash in the sidelines. There is a danger in remaining out of the market in the current negative interest rate environment.
TCMR: What are you expecting with commodity prices in the next year or so? Will China’s growth continue, or is the country in a bubble?
JP: China has attempted to engineer what the media is calling a “soft landing,” to try to weaken real estate prices and restrain inflation. To some extent, it seems that its policies have been successful. If inflationary pressures in China continue to moderate, then the central bank should have room to loosen credit conditions. This should help to offset economic weakness.
When you look at the strength in copper, the Australian dollar and other leading or coincident indicators of Chinese economic activity, it’s very hard to take a bearish outlook on China. Major Chinese stock indexes have held at support levels and are starting to bounce. So, overall, I expect China’s economy to be somewhat constructive for commodity prices.
TCMR: Do you anticipate any significant potential disruptions to the global economy?
JP: I think we are going to see mergers and acquisitions in the commodity space following the recent high-profile merger of two very large affiliated companies, Glencore International plc (GLEN:LSE) and Xstrata PLC (XTA:LSE). Companies that work closely with governments are in a position to implement strategic industrial policy, which may trigger a wave of consolidation in the commodity space and a struggle for control of a limited universe of valuable mineral assets. That environment would create a very positive scenario for the prices of mining companies’ securities in general.
TCMR: Would you say the giant majors and governments of developing nations are competing for assets at the lower end of the food chain?
JP: There’s a lot of evidence to support this view. Indian companies now seem to be on the hunt and there are a lot of buyers for world-class resources. A number of companies that control world-class resource projects seem to have very compelling valuations, following the horrendous equity market in fourth quarter of 2011. I suspect we are going to see a huge number of merger deals, hostile takeovers and various forms of consolidation, reducing the supply of commodity shares.
TCMR: You are invested in critical and strategic metals. What looks attractive to you in those investment areas?
JP: One area we’re focused on is fluorspar, which is an important mineral used in a number of metallurgical processes, such as aluminum production. It’s also the raw material necessary for the production of hydrofluoric acid, which is the precursor to all hydrofluoric chemicals and a number of products containing fluorine or made through the process of fluorination. It’s an obscure commodity, but it is critical to modern life and to the world economy. In fact, it’s so strategic that the EU put it on the list of critical commodities. There has been a lot of government angst about the availability of fluorspar because China controls approximately 50% of world fluorspar production. China was once a fluorspar exporter, but the country is moving more toward exporting value-added chemicals and consuming the raw chemicals itself. That means the rest of the world has to look for non-Chinese sources for fluorspar. There are very few sources of fluorspar from operating mines and not many deposits can be brought into production in the near future either.
…
TCMR: You also mentioned Mongolian coal. What’s going on there?
JP: Mongolia has a host of remnants of the sea that vanished when the Indian and Asian subcontinents collided a long time ago. Those remnants formed a vast sedimentary basin that has been transformed into one of the world’s largest undeveloped coal provinces, with both thermal and coking coal. Mongolia’s thermal coal story is quite interesting. China is now the world’s largest importer of thermal coal, while India has very limited supplies of thermal coal. Mongolia will inevitably emerge, in my view, as an important regional thermal coal supplier.
Also, Mongolia is the world’s fastest-growing economy. This is creating a growing need for new electricity generation capacity. The country’s large thermal coal deposits have an important role to play in providing domestic energy. There’s a wave of new interest in Mongolia from strategic and financial investors. We think that the country’s real 2011 gross domestic product (GDP) is probably going to end up 18% higher than the prior year. We believe this GDP is going to keep compounding at a very high rate over the next 10–20 years.
TCMR: How can investors participate in the market in Mongolia? There is a stock exchange there, but not many companies, and liquidity is low. What’s the story there?
JP: We’re very active investors in the Mongolian Stock Exchange (MSE). Certainly the market is not liquid, but there are no restrictions on foreign ownership of shares, and the currency is freely exchangeable. It is very easy to open and fund a brokerage account. The hard part is sourcing shares. The London Stock Exchange (LSE) is now managing the MSE under a three-year contract. We’re quite optimistic about the potential for liquidity on the MSE to increase in the future. Some thermal coal stocks are listed on the MSE, such as Sharyn Gol JSC (SHG:MSE), a coal producer controlled by Firebird. There are other coal companies with assets in Mongolia that are listed on other major exchanges, although we don’t have a particular view on those companies.
…
James Passin joined Firebird in 1999. James is a graduate of St. John’s College, where he majored in philosophy and classical literature. James serves on the board of directors of several Mongolian and Canadian companies, including Sharyn Gol JSC, Baganuur JSC, BDSec JSC, National Investment Bank of Mongolia, Vanoil Energy Ltd., Undur Tolgoi Minerals Inc. and Fluormin PLC, a UK fluorspar mining company.
Grand Opening of the 5th Annual Asia Pacific Unconventional Gas Summit 2012, Taiyuan City, China, April 9th to 10th
Focus on Asia Pacific Market, Explore Potential Opportunities
SHANGHAI, February 21 (BUSINESS WIRE)--With the unveiling of China’s 12th Five-year Plan and the preferential policies for unconventional gas, China’s unconventional natural gas market will be greatly benefited. Under the circumstances, the 5th Annual Asia Pacific Unconventional Gas Summit 2012 will be held by CBI China this coming April 9th to 10th in Taiyuan City of China’s Shanxi Province. This Summit is greatly supported by China United Coalbed Methane Corporation, Malaysia Gas Association, Mongolia Coal Association, Mongolian National Mining Association and Vietnam Gas Association.
In future, China will lend more support to the development of the CBM industry in terms of legislation, investment and subsidy. According to the 12th Five-year Plan for CBM development and utilization, China’s capability of CBM exploration, development, extraction and utilization will be largely improved. According to China’s Ministry of Land and Resources (MLR), with the approval of the State Council, China will finish survey and evaluation on its shale gas resource potential by 2015. MLR has also recognized shale gas as an independent mineral resource, which will encourage large-scale development of this resource in China. The 12th Five-year Plan for shale gas development will mark the start-up of China’s shale gas industry.
This year, the 5th Annual Asia Pacific Unconventional Gas Summit will continue to focus on the Asia Pacific market. Policies of Asian governments on unconventional gas development, progress of ongoing projects and the latest technologies and their applications will be discussed at this event. The conference will also serve as a platform for international communication.
100+ leading enterprises in the industry will gather to share their precious experiences and advanced technologies, as well as discuss the brand new pattern of the unconventional gas industry. Relying on the substantial support of China United Coalbed Methane Corporation and the association, this Summit will surely become the most authoritative and professional high level international communications platform of the industry.
More details, please visit the website: http://augs.cbichina.com
Lao National Assembly President to visit Mongolia to enhance cooperation
VIENTIANE, Feb. 20 (Xinhua) -- President of the Lao National Assembly (NA) Pany Yathotu is expected to pay an official visit to Mongolia at the invitation of Chairman of State Great Hural ( Parliament) Damdin Demberel on Feb. 23 to 29.
Pany's visit is aimed at enhancing the friendship and sound cooperation between governments and parliaments of Laos and Mongolia, strengthening their exchanges of experience and knowhow and promoting mutual assistance, according to the Lao News Agency.
The NA is Laos' parliamentary body, voting on the nation's key policy, constitutional and legal decisions as well as overseeing the performance of the government and judicial bodies.
Let us flourish, but let us not forget
February 20 (UB Post) What is the wealth of Mongolia? Clearly, investors all around the world, influential economists and massive media outlets are all talking about the same thing; the mineral wealth of Mongolia.
This is our country and territory, we are free to dig up the ground and sell whatever is down there. But we cannot forget that we should also refill those holes and mines and restore them back to their previous conditions for the sake of another precious wealth of Mongolia, our unique nature and environment.
The explorations at Oyu Tolgoi, beginning in 2003, and further foreign investments in various Mongolian mining projects in the past few years, started the direct association of Mongolia with mining. Due to a low population density and general technological underdevelopment, most of Mongolia’s nature has largely been left in its original state.
Any mining operation comes with problems. A very serious one that is always being talked about, but lacks implementation – especially in Mongolia – is ecological restoration upon the mine’s closure or abandonment.
There are deposits rich with copper, gold, molybdenum and coal in Mongolia. Huge mining projects have commenced, with Oyu Tolgoi currently at the height of its construction process and scheduled to begin producing copper and gold by 2013. In addition to Mongolia being the third largest producer of fluorite in the world, one of the largest coal deposits on earth – Tavan Tolgoi – has planned to enter the international market through its IPO in June 2012.
However, progress in environmental restoration in Mongolia not looking as promising. Numerous mines were abandoned during the time of Communism and they are still here today, covering a total of 16,000 ha. The State Registration Office of Mongolia shows that majority of the mines that have not been restored are those pre-1990s abandoned mines. They are mostly abandoned, closed iron ore and coalmines, located throughout Dornogobi and Khentii Provinces.
Specialist from the Ministry of Nature, Environment and Tourism (MNET), S. Erdenetsetseg said that a study was conducted on active, abandoned and closed mines in Mongolia in 2011, during a meeting at Mongol News’ Eco Conference Hall.
“From 2009 to 2010, there were 500 separate mining sites with a total of 3,984 ha of land in 56 sums in 15 provinces that were left abandoned with no sign of ecological restoration. Over 60% of them were exploration and search operations done by 141 private companies. The remaining 40% of destroyed and unrecovered land is the victim of illegal mining,” S. Erdenetsetseg said.
On the question of restoration and environmentally responsible mining standards in Mongolia, she said that there have been outdated standards being followed until recently, when in 2010 a new, up to date standards and policies on mining site restoration were introduced.
She stated that it was a giant step towards the success of Mongolian environmental restoration, as specific techniques and guidelines were introduced for technical and ecological restoration. Before, there were no guidelines for Mongolian jurisdiction to punish mining companies, which were irresponsible in their mine abandonments and closures. As a result, although the MNET inspectors report irresponsible mining companies to Mongolian authorities, the cases were almost always closed.
She added that since new technologies and ways to mine and exploit minerals are introduced every day, environment restoration policies must also be updated often.
The State Registration Office (SRO) reports that every year, around 11,800 ha territory is destroyed by mining operations. Around 59% of them are technically restored while around 2% is ecologically restored.
It is a known pattern that the environment is destroyed proportionally to the size and growth of mining operations. We all must be aware of this difficult but necessary problem that needs to be solved. If we do not, we may face severe consequences in the future.
Other countries can provide use with grim examples of what happens when restoration laws are not followed. Tui Mine in New Zealand was a copper and lead mine abandoned in 1973 after the company that owned it went bankrupt. Over the next several years, large, highly poisonous remnants formed a pool that was held back by a large dam.
In 2007, after the Government realized the dam was deteriorating, presenting a huge risk to human and animal life if it were to collapse, as the lake located below the dam supported a vast natural habitat and flowed into many other waterways. It took USD 10 million and three years to fix the problem because it was not addressed properly at the time of abandonment.
There is no denying that something like this could happen in Mongolia. The wealth of Mongolia may lie in its underground riches. We are reminded of the bright future of Mongolia when we hear about progress in our mining sector, but we must always remember the future consequences of what we do today, and deal with problems today.
Taking the Slow Train to Mongolia
The scenic route to a fast-moving country
Editor's note: GlobalAtlanta's Trevor Williams traveled on assignment to Mongolia last year. This story is part of an upcoming special report on the country, the second to be featured in our Emerging Market Series.
February 24 (GlobalAtlanta) Mongolia is on a mineral-fueled dash to modernity. Vast deposits of coal, gold and copper lie beneath its steppe, like magnets pulling foreign companies to the country.
Projections put its economy growing at as much as 15 percent this year, reaching more than 20 percent annually sometime in the next five years, mostly thanks to resource exports to neighboring China. Rapid changes are expected for the environment and traditionally nomadic culture.
But when I decided to travel to Mongolia, I wanted to take it slow, betting that a plodding Soviet-era train would provide a unique window on the country's development.
People thought I was crazy for choosing the 30-hour haul from Beijing to Ulaanbaatar instead of a two-hour flight. They were justified: the train connecting neighboring capitals would take nearly twice as long as flying across the Pacific.
Out of China
I arrived before sunrise at the Beijing Railway Station, jet-lagged and loaded with luggage. Migrant workers gathered at the platforms, camped out on their own huge bags.
The green train that pulled in was more like a bumbling caterpillar than the sleek bullets blazing the routes between China's major coastal cities. The golden horse logo emblazoned on the outside showed me I was in the right place. This was the Trans-Mongolian Railway.
My second-class sleeper cabin was clean and comfortable, if not luxurious. Four cots, two on each side, folded down from the walls. Mongolian attendants provided a set of sheets (for a fee), a heavy orange blanket and some packets of instant coffee.
I shared these ample quarters with Batbaatar, a Mongolian jewelry trader returning from Turkey via Beijing. He spoke little English and no Chinese, but even if we had shared a language, his constant sleeping and blaring hip-hop would've precluded much conversation.
Once we settled in, it surprised me how quickly Beijing proper disappeared. I had traveled to the Chinese capital five years before, but this was beyond the glitz of new shopping streets and the charm of old tourist sites.
I watched the sprawl for two hours as we crossed villages filled with rows of long, low brick homes. We passed through jagged mountains, dipped in and out of tunnels, snaked through narrow gorges and emerged to see frozen lakes spreading out like paved lots in open valleys. Farmers and shepherds watched wistfully from their fields. Even this close to Beijing, these areas felt forgotten - until I saw the power plants.
Smokestacks and cooling towers kept emerging, and a procession of railcars carried coal back toward the south. I wondered how much of the coal had come from Mongolia and whether these far-flung communities existed only to feed energy to China's coastal boomtowns.
In the afternoon, the train ran parallel to earthen segments of the Great Wall abutting the foothills of distant mountains. Watchtowers set a few hundred yards apart continued for miles.
I finally peeled myself from the windows to search for food. Each car had a tap for boiling water that could be used for tea, coffee and instant noodles, but I needed something more substantial.
After sharing a car with all Mongolians, stepping into the dining car was like heading back into China. A waitress greeted me in Mandarin, and the clientele spoke with thick Beijing accents. I downed some oily stir-fried pork and green bell pepper, bewildering a few staring diners who must've never seen a foreigner use chopsticks.
After a nap, I awoke to see the sunset. Aquamarine spread across a cloudless sky as hints of purple hovered over the horizon. Hypnotized, I watched wind turbines spin in the distance until it all faded to black.
The Mongolia Crossing
Crossing international borders by foot, ferry, car and plane had always been straightforward - a few questions, one stamp and done. By train things were far more interesting.
As we moved from China, a communist nation with an established capitalist economy, to Mongolia, a thriving democracy still learning the ropes of the free market, many things changed, starting with the train's wheels. China and Mongolia used different gauges, so we would have to disembark for three hours in the dead of night while workers made the routine switch.
As we lumbered to a stop, a loudspeaker announced in English, Mandarin and Mongolian that we had reached the border town of Erlian. My buddy Batbaatar, recovering from another long nap, groggily assured me my bags would be safe in the train. He led me through the brisk cold and into the station, where our group of weary travelers crammed into the lone snack shop.
I considered a few ways to pass the time. Practicing Chinese seemed like the most productive, so I approached a guy who looked about my age.
"Ni hao," I offered, but his response caught me off guard.
"I'm not Chinese," he said gruffly in English. As I'd soon find out, the only thing some Mongolians resent more than being mistaken for the Chinese is the Chinese themselves.
Munkhuul was a nightclub owner from Ulaanbaatar traveling back from Beijing with his two sisters, Bayaraa and Muunuu. He was quick to overlook my linguistic faux pas, and I spent the next two hours chatting with this trio about modern Mongolia.
They were fiercely opinionated, especially when they found out a reporter was their captive audience. Yes, Mongolia is a bucolic place with more horses than people, they assured me, but it's also a cosmopolitan land filled with smart, savvy people. The Internet is opening the youth to Western ideals, and there, you can actually use Facebook. China blocks the social networking site, they noted with disdain.
All the antipathy toward their southern neighbor brought to mind an ironic fact. While the countries have fought throughout history, Mongolia's immediate ascent is largely dependent on China's continued growth. Living next to a giant can be worrisome for some Mongolians; many "small" cities in China have more people than their entire nation of 3 million.
Back on the train, I retreated to a toasty compartment to await customs. A young Chinese official asked me a few questions to seem stern, then stamped me through. Awhile later, a female Mongolian officer with a furry hat and a sturdy build made me stand up for a better look as she eyed my passport. She seemed to consider searching my bags but apparently didn't peg me for a smuggler. A passport stamp of a Mongol ger, or yurt, sealed my entry into the country.
Lamb Dumplings and Pollution
Ulaanbaatar, known as the world's coldest capital, was still more than 12 hours away when I drifted off to sleep again.
I awoke to the calming rhythm of the tracks and finally saw Mongolia in the light. I'd missed most of the Gobi Desert but was lucky enough to see a few woolly camels combing the flat, brown terrain for scrub grass. Way off in the distance, I spotted an antelope.
It wasn't until later that we hit the steppe, an endless, grassy expanse frosted with patches of snow. The sky was a canopy of crystal blue. Sprouts of civilization began to emerge. I imagined the ramshackle railroad settlements as similar those of the old American West.
My first chance to breathe Mongolian air came in a city called Choir. At that stop, Batbaatar bought a bag of steaming buuz, dumplings stuffed with lamb, for the equivalent of 40 cents. He shared them with me for a hearty, unexpected breakfast.
Soon we began to see gers, the round felt tents that house most Mongolians. The terrain grew more hilly, and we made wide westward bends as we approached Ulaanbaatar, letting those of us in the rear see the engine chugging ahead of the rest of the train.
When the construction cranes and high-rises emerged, we were still out in the ger districts. More like slums than suburbs, these sprawling, haphazard clusters of government-granted plots are home to more than half the city's population.
Hesitant or unable to buy new apartments rising in the city, residents here stay in their tent homes, burning whatever they can find to stay warm. The resulting pollution has begun to pose a serious health risk.
When we steamed into the Ulaanbaatar station, my trip had just begun, but I felt like I already knew something about the place.
It was a unique lesson taught by interesting people and timeless landscapes watched over by the eternal blue sky venerated in traditional Mongolian animism.
Now the world is paying attention to the country unfolding beneath it.
A Mongolian Mogul
February 21 (Capitalist Exploits) -- Jamul Jadamba is a Mongolian National with an intriguing and diverse background. He’s fast become one of the most valuable members of our on-the-ground network in the country, and he’s a man we are paying a LOT of attention to. You’ll see why over the next few days.
Born in 1976 to a family of doctors, Jamul’s education began at the Russian Embassy School in New Delhi, India. He then attended and graduated from the American Embassy School in New Delhi. From there he proceeded to Northeastern University in Boston.
CIBC in New York scooped him up out of school. His 7-year stint culminated with him in the role of Vice President, Capital Markets. Jamul jumped back into school and received his MBA in Finance from NY University.
From 2007-2011 he held the position of Director, Investment Banking at Rodman & Renshaw, founding the metals and mining group. Finally, in 2011 he founded Mogul Ventures Corp, a coal exploration and development company, and is now the Chairman of AU Mogul Group Inc, a Mongolia-focused boutique merchant bank.
Jamul was recognized in 2010 by the mineral Resources Authority of Mongolia as the leading Investment Advisor to the mining sector. From 2005 through 2011 he was the main contributor for Oxford Analytica, writing on Mongolia’s economic and political developments.
This is a guy who isn’t slowing down. As you’ll see, it’s a trait many Mongolians share – they are extremely hard-working people.
——–
Chris: Jamul, you’re a busy guy and I know you’ve been working hard lately. Thanks for taking the time to chat. We outlined your experience a bit in the intro to this interview, but give us a really quick “elevator speech” summary of your background.
Jamul: First, thanks for speaking with me today Chris. It’s great to get the chance to tell the Mongolia story from the perspective of a Mongolian.
So, background… my father, Dr. Z. Jadamba, was the first Mongolian to become a Director for a UN organization. My mother, Dr. N. Horloo, was a leading neonatologist and Deputy Director of a children’s hospital. My sister, Dr. J. Tsolmon is the currentl Deputy Minister of Health, and is running in the parliamentary elections this year. Her husband, my brother-in-law, Mr.O. Och is the foreign policy advisor to Prime Minister Batbold and has been recently selected to become Mongolia’s next Ambassador Plenipotentiary to the United Nations. My brother, Mr. J. Purevtseren, is an entrepreneur and was a partner in the first private gold mining venture in Mongolia.
Chris: So just a bunch of under-achievers it looks like.
Jamul: (Laughs).
I was just on a call with some of my Aussie shareholders before you rang up. In Mongolia you will see that we’re hard working people, but we’re also a very fun-loving culture. It’s quite different from our other neighbours in Asia who, in my opinion, don’t leave enough time to enjoy life. Mongolia’s quite different in that regard.
I think in terms of Mongolia, we were traditionally pastoral nomads, so basically when the weather is good you have a lot of free time, especially in the summer. The weather is nice; the animals basically take care of themselves. You don’t have a huge workload, which is quite different from being in a society where you’re rice farming on a very small plot of land and you basically do back-breaking labor 24/7.
That nomadic lifestyle also comes with risks, especially in terms of various weather calamities that could wipe out your livestock and livelihood.
Before the invention of repeat firearms, the military capabilities of the Central Asian nomads gave them quite an advantage on the battlefield. In the old days the “insurance” was that when the economy collapsed, Mongolians and other central Asian nomads went and raided their neighbours, (laughs) That was basically “Plan B.”
Chris: I’m reading a history book at present which details some of what you’re talking about. The nomads you discuss had a lot of skill in horsemanship and were akin to guerilla soldiers of today. They would swoop in on a town or village and attack, and literally within minutes disappear back into the hills. I don’t think they held much territory. It was very, very difficult to attack these nomads who were comfortable living in harsh climates in small bands.
One of their significant advantages was that attacking them was extremely difficult. Again much like guerrilla soldiers of today. Finding them was problematic, and then dealing with the inhospitable climes saw standing armies watch many fellow soldiers succumb to disease and freezing temperatures in droves. In contrast the Asian nomads knew how to live in those conditions perfectly well. Not dissimilar to the situation we have today with the war on terror really, where “terrorists” who are essentially nomadic are being attacked with B52 Bombers.
Jamul: It’s actually untrue that they didn’t hold territory. If you look at the history of China for example, four of what the Chinese call “Dynasties” were established by nomads who conquered China and stayed to rule them. There were two Dynasties established by Mongolians. The first was the Liao which was known in the west as Kidan, which is where the word “Cathay” comes from. The Russian word for China, for example, is still “Kitai.”
These were Mongolians who conquered China probably around 900 AD. Then Kublai Khan took charge and his descendents ruled China again from the 12th century onwards. Then another group of nomads known as Manchus, we call them Jurchid, also ruled China twice in two separate Dynasties.
The Qin that you’re referring to are actually not Chinese. They were originally northern nomads just like us. They tried to retain the language and they had very strict laws about marriage with the Chinese. It still did not help them. They became heavily “Sinified” and now they’re basically extinct. I believe there are only 100 people in North China now that can speak the original Manchu language.
Chris: I stand corrected.
Jamul: The problem with Mongolian history is that most of the literature about Mongolia was written by people and civilizations who have suffered from our attacks during the days of the Mongol Empire, so there exists a fair amount of bias (laughs).
That’s how our history has been projected. The original Mongolian historical materials, writings – the few that exist –are known by scholars but haven’t been widely read. There’s a big asymmetry in terms of information and where that information comes from. We have a historical PR issue is what I like to think.
Chris: That’s a great point Jamul, I think that any clear thinking person needs to read history with the understanding that those who wrote the history book had a bias.
Jamul: I’m a big history buff. I’ve probably read 40-50 books on Mongolian history, so I know it quite well. I have a pretty good idea about what happened in my country over the last millennia or more.
My primary education was in the Russian system so they were also quite heavy in details of Eastern Europe. Their version of European and Eastern history is quite different to that in the West. The focus and the ideology was quite different. It brings an interesting perspective.
Chris: A diverse perspective is, I believe, healthy. It doesn’t matter where your education originally stems from, there is always going to be bias, and often times things you’ve learned which are entirely incorrect.
The educational system I was subjected to in South Africa was one that was very heavily biased toward the white supremacist South African viewpoint. When I look at what I was taught back then, it’s a miracle I haven’t turned into a raving lunatic.
Since that time, even with my more recent, varied education, I find it frightening some of the garbage that has been thrown at me under the guise of “education.”
How do you unwind something like that? It’s not an easy task. What do you think historians will be saying about Mongolia in another 100 years or so?
Jamul: Well I think we’ve been in decline for a long time, in fact, until very recently from a historical point-of-view. People like to talk about China and say China is not rising, rather it’s just sort of claiming its historical role in terms of its economy and political and regional importance. Basically, what I like to say is “guess what, we are a small nation but we’ve always punched above our weight, historically.”
Huge changes in global, political and economic landscapes came about because of movements of inner-Asian people such as Mongolians. Before the Mongolians were the Huns. After the Huns there were the Turks and after the Turks there was us. Each of these people were similar in cultures and economies, and they shaped the Eurasian continent quite heavily.
Until the 18th century Mongolia was a regional military power to reckon with. At one point in time the Mongolian language was spoken as the lingua franca of Asia. We’ve been historically very influential in the region. The country fell to hard times once it was integrated into China’s Manchu Dynasty, and was in decline until the beginning of the last century, when Mongolia became a sovereign nation again.
We paid for our sovereignty because we had to rely on Communist Russia to defend it, and as part of that we’ve experienced over 70 years of communism – not exactly 70 years, but probably in its true form, something like 40-50 years of Stalinist dictatorship.
We snapped out of that finally in the 90s and opened the country to the wider world. Within just over a decade we’ve found big, world-class mineral deposits. Now everyone looks at the country and says, “Hey, this country is sandwiched between the Bear and the Dragon, it’s actually not in a bad location. They happen to have all the good stuff in terms of minerals, and they are right next door to the largest consumer of it.”
This scenario has changed a bit. We’re positioned as neighbours of Russia and China, and we have a balanced economic interest in them both, so I think Mongolia’s sovereignty is secure. We’re living in a modern world where counties behave more or less in a civilized fashion towards one another, and we have very friendly relations with these two neighbours.
We don’t have any disputes – no border issues, no other political disputes with either Russia or China, so we’re in good shape. Now, what Mongolia should do is to sort out its direction in terms of how it’s going to develop the economy, what kind of society it’s going to be, and bring wealth to its people on the back of commodities.
It’s a unique country, and an important manifestation of that is that we’re the only one in the region with a true Western style democracy. It’s already seasoned, having been in place for over two decades at this point, with several peaceful transfers of power between competing and opposing political parties. The system is entrenched and it works. It’s not without its problems, but I think that in a country of 2.8 million this kind of democracy can work.
——–
Chris again. Jamul and I spoke for quite some time, so I’m going to spread this interview out over several days.
Tomorrow we’ll talk more about China, and it’s likely role going forward. I think you’ll find Jamul’s perspective both intriguing and informative.
- Chris
A Mongolian Mogul – Part II
February 22 (Capitalist Exploits) We broke from our conversation with Jamul Jadamba yesterday getting ready to discuss China. Here’s part II…
——–
Chris: You made a great couple of points yesterday regarding China. You can’t compare China to Mongolia at all.
As investors, it’s not just the growth that’s important, but rather the “percentage growth.” I recently discussed this when talking about Frontier Market investing. For a country the size of China (approaching 1.4 billion people) to grow is one thing, but when you have a country like Mongolia, with 2.8 million people, it’s a very, very tiny country on a global scale – the result is much different.
An exponentially growing economy in a tiny country allows an investor immense leverage, and a much higher probability to make multiples on their capital by playing the growth that comes out of this dynamic.
Jamul: Yeah, it’s unprecedented. It’s a tiny population sitting on world class mineral wealth.
Another way to put it is to say that Mongolia’s economy is a hugely leveraged bet on China’s growth as well. So, you’re absolutely right. Starting with a very low base to begin with, in a situation where the supply/demand equation is skewed in our favour, means that you can grow at an incredibly rapid pace.
Chris: The other thing that we mentioned, being a dominated neighbour of China and Russia over the last 100-odd years has been a distinct disadvantage.
If you look back in history there are some other examples of this, historians call it the “advantage of backwardness.” We discussed this previously when predicting prosperity. Essentially you have a situation where a previous disadvantage becomes a significant advantage, usually due to technological changes altering the dynamics of commerce.
Coming back to Mongolia, we have a country that now finds its previous disadvantages to be significant advantages. The fact that the communists controlled the country ensured that much of the mineral wealth remained lifeless. So, the country is still largely untapped, which is why they’re finding new deposits literally every next Tuesday. Coupled with both Russia and China having turned largely capitalist, and growing strongly, Mongolia could not be in a better neighbourhood.
Jamul: Absolutely. With the changes in the political system, and obviously the economic growth – we’re just on the right trend at this point. I don’t know how long it’s going to last, because I think at some point in time China will have to adjust its political system to its changing economic reality and the demands of its people. I think we have a couple of decades before that really comes to a critical point.
Chris: Yeah, I think the cats out of the bag now in China. It is very difficult for the political class there to revert to a system that they had 50-60 years ago. The abilities of the citizenry are now amplified.
It’s one thing being able to suppress peasants who have little to no capital, such as the North Koreans for example, it’s completely another once capital starts flowing freely. Capital automatically provides people with choices, and with economic choices follows political power. While China is still a single party state, the populace has a much larger stake in the country than they did 60 years ago. This is very influential.
Jamul: Absolutely it is.
Chris: I think the time is going to come where a political change will take place and the only question really is whether it comes in a relatively benign form, or via Molotov cocktails, which is never particularly good for business.
Ironically the political situation in China is almost the opposite of what we have in the West, where people believe they have political freedom, while economic freedoms are stripped from them on a daily basis. The natural progression is that you end up with political suppression as well. History shows us this in full colour.
That being said, any upset in China would likely see demand in everything from coal to zinc to uranium slow down. With the relative size of the Mongolian economy, and the favourable factors of their geographic location, maybe GDP growth slows to something like 3% for a while.
Jamul: Mongolia’s going to be quite different because the base is low, but these jumps in GDP are lumpy. Look at a project like OT. That in itself will have a 25% impact on GDP. There are vast amounts of exploration being done right now, so more and more of these world-class deposits will come online. Mongolia’s base is still low, so a continuous commissioning of deposits the size of OT will have less and less effect on GDP, on a percentage basis. The impacts won’t continue to be 25% bumps, but it will continue to make an impact of say 10%, 5%, etcetera. These are large capex commitments, in most cases being made by large international companies.
Even if Chinese growth slows down, OT is still going to get built. It is going to be a low cost producer in the market. It’s not going to be a linear relationship to the Chinese economy, where China slows down by 20% and Mongolia slows down by 20%.
I think in many ways because we have such a small base, and the capex that’s coming into the country is lumpy and represents long-term capital expenditure commitments, some of this stuff will be pretty sticky. I think projections of Mongolian GPD growth at 15-20% over the next three years are going to stand, barring some true meltdowns – Rio Tinto going into distress, or copper hitting some very, very low prices. Only in these situations could you possibly see some of these projects getting mothballed.
These big underground mines in particular, once you get them started you cannot stop, because it will be very costly to stop and restart it again.
Chris: The other thing worth mentioning, as it’s not well publicised, is that the OT and TT projects, as enormous as they are, are just a slice of the entire picture.
Multiple resources are on the menu. There are multiple other projects being developed in multiple resource sectors. So, if for example you had copper collapsing in price, or some new technology coming along displacing the need for coal, sure it’s going to have an impact on certain projects, but in terms of all the resources in the country they’re very well diversified. I struggle to find something that is going to significantly dent overall GDP growth moving forward.
Jamul: Yeah, I think the biggest risk is really Mongolia’s own internal political risk, especially because we don’t have these other catastrophic risks. We have social problems that are due to poverty and growing pains. The economy is expanding at a rapid pace, and wealth not being very well distributed across the population – that kind of stuff.
We don’t have ethnic or religious tensions. We are a free society; people certainly have outlets to express their frustrations, they vote, they have a say in how the country is run. It’s not a high-pressure cooker.
From that perspective Mongolia is more stable. On the flip-side, having an open, democratic system means that decisions that affect the country significantly will go through a very open, public discourse, and those kind of decisions tend to take time. It’s not just one or two or a dozen people making decisions, it’s a representative democracy with 76 members of Parliament who debate until a consensus is reached.
Certain decisions can be slower because of this democratic process, but these decisions are there to stay. There’s unlikely to be any military coup in Mongolia, there’s unlikely to be an overhaul of the political system where all the prior decisions are thrown out the window. From that perspective I think it’s attractive and feels familiar to Western investors in particular.
Chris: There are often risks that come out of Foreign Direct Investment (FDI) pouring into a country. It can overwhelm an economy, which from an investment perspective can be very lucrative, but domestic tensions can also arise as a result.
Let’s take Angola as an example. You’ve got a lot of influence from foreigners coming in there, and especially the Chinese, who are reluctant to hire locals. This creates a lot of tension among the local populace. Do you have a similar situation in Mongolia?
Jamul: Mongolia is different from a lot of countries in the developing world because it’s a homogeneous country. When you come to do business in Mongolia you usually end up partnering with locals.
There aren’t the issues that you have in South America or in Africa, where you have “classes” of people that are divided either by race or certain tribal affiliations that have been in power forever, and are resented by the rest of the indigenous people. Mongolia is homogeneous, and most of the time if you’re building a mine in Mongolia for example, you have Mongolian partners, Mongolian joint venture partners, etcetera. There isn’t that issue of the indigenous people versus others. That’s point number one.
Point number two, particularly in relation to the Chinese, we have vast experience dealing with China. It’s amazing, for example, that a country neighbouring China has essentially zero Chinese population in terms of demographics, whereas if you look at Thailand, Malaysia, etcetera, there are huge enclaves of Chinese, native Chinese that tend to play quite prominent roles in terms of the economy and in terms of commercial groups.
Mongolians have historically, and continue to be, very careful in trying to ensure that our interests are protected. This is done through the legislature and by the commercial decisions that people make. Our immigration policy has limits on what percentage equivalent to the Mongolian population can come from any single country, which is to prevent the country from being flooded with immigrants from one place.
Thirdly, in Mongolia you would be well-advised to do business with local partners and to hire Mongolians. Unless you have an explicit agreement with the government and explicit contracts. It’s basically impossible for Mongolians to be overwhelmed by foreigners.
It is impossible to come in and bring your hundreds of thousands of workers and start building your projects on your own as some African countries have allowed. From that sense Mongolia’s policy is much stronger. It’s a much stronger sovereign and nationalistic stance compared to other countries, where they cut deals because of high-level corruption.
Chris: I guess it comes down to the judiciary, and the power of that judiciary to impact the level of corruption.
Jamul: Right. For example in a place like Angola, I would imagine that a certain group has been in power for the last several decades at least, and they extract all the “rent” and they strike these commercial deals which are beneficial to them, but detrimental to the rest of the population. In Mongolia that’s impossible, as 97% are ethnic Mongolians. It’s an elected democracy; they’ll get kicked out. In fact they likely won’t even make it out (laughs)!
Chris: I was talking to Harris Kupperman recently with regards to the ethnic background in particular countries. He wrote an interesting piece on Zimbabwe. One of the favourable aspects in Zimbabwe, even though they’ve had tensions in the past, is that they are one of the few countries on the African continent where a majority of the population is from a single tribe. 82% of the populace are from the Shona tribe, which is an anomaly within Africa. Botswana is another example of a country that is homogeneous. The peace and relative prosperity shows.
You look at many of the other countries in Africa and you’ve got 14, 15, 16 tribes that make up the country. Catering to all these different opinions and cultures can be a very difficult thing to do.
When I look at Mongolia I can safely check the “ethnic tensions” box off the list and say, ‘Well, we’re not really going to have to worry about this one. You have a very stable environment for Mongolians and by extension a very stable environment for investment.
Jamul: Exactly, that’s a very strong foundation.
——–
We’ll break there again and finish up with Jamul tomorrow, when we discuss a mining company he is taking public shortly.
- Chris
A Mongolian Mogul – Part III
February 23 (Capitalist Exploits) Jamul Jadamba is an entrepreneur focused on creating wealth through adding value. He’s also a Mongolian national, which makes him uniquely qualified to address the opportunities and challenges his country faces.
We’ve been speaking to him for the last 2 days, and this final discussion focuses a bit more on what he is doing as an investor and business person to grow his wealth, and the wealth of his investors.
——–
Chris: Jamul, you’ve got a number of different projects you’re involved in. Tell me about the project you’re taking public shortly.
Jamul: The Black Hills coal project is within a Canadian company called Mogul Ventures Corp., and we are going to be filing an application with the Toronto Stock Exchange in the next couple of weeks. Once the Exchange approves, we expect that process will take 3-5 months – we certainly hope to be public by summer of this year. That process is ongoing.
In terms of various sectors, we’re active in the resource space and Mogul Ventures is the most advanced of our projects. We have 43-101compliant resources; we have a company that’s going public.
There are a number of other projects in base metals, iron, ore, and precious metals that we’re looking to be able to close deals on in the coming months. We also have a very early stage grass roots exploration project in the oil and gas sector.
That basically covers the resource sector. I also think that real estate is going to be a bit of a no-brainer for Mongolia. You have an environment where GDP is growing 15%-25%, whatever number you want to put on it, on average over the next few years. Real estate prices are going to go up.
Currently Mongolian law allows only Mongolian persons, natural persons or companies 100% owned by Mongolians to own Mongolian land. I think there’s a huge opportunity for myself and people like me to go and buy land in Mongolia, urban land in Mongolia and do development deals. Foreigners can’t own land so you can enter into a deal with a foreign developer and offer them long-term leases.
We have a portfolio of real estate projects that we’re looking to develop. We’re in the process of closing one such deal where we’re proposing to build a 17-story hotel in one of the upscale districts of the city. We have a large plot of land where we’re looking to build a convention centre, so that’s section number two.
In any economy if you want to play a significant role, I think being involved in the financial sector is a must. At some point in time I would like to get into the banking side of the business. That’s more in the future. It’d require obviously a deployment of larger pools of capital. So these are the areas that my group will be focusing on.
Chris: I would be interested to know more about that real estate deal, if you’re looking for a few shekels Mark and I might be interested to have a look at that.
If we go back to the Black Hills project; I know that a lot of work had been done on that particular project by the Russians prior to your acquiring it. Would you care to just run through what’s been done on the project in regards to site work, proving-up the concession, and how you acquired it.
Jamul: Absolutely. This is a pretty well-known project. There are really two deposits that we think are linked, where there are some drill holes as well. These deposits were discovered and drilled in the 60s and 70s. There were 137 drill holes sunk on the property. The known deposits are pretty shallow since in those days they weren’t interested in coal below 100 meters, so they’re really just down to that depth.
Out of the 137 drill holes on the property, they came up with a resource of 180 million tons of coal in one deposit, and another 80 million tons from the other outcrop. The historic resource on the project is somewhere around 260 million tons based on 137 drill holes, so that’s a significant amount.
Chris: You say that they weren’t interested in drilling too deeply. Was that because of technology? What was the reasoning behind that?
Jamul: The reasoning behind that is back in those days coal was very cheap and it just didn’t make economic sense to go for coal, particularly in Mongolia. There are a lot of other deposits that are shallow so it just didn’t make sense to drill any deeper. The coal was tested back in those days, hydrological work was done and it was demonstrated that there was enough water to operate a mine.
They also did a feasibility study according to the standards at the time for development of a million ton per annum, open cut mine for power plants.
A lot of historic work has been done. We acquired the project from a Mongolian company that has an exploration license. The company was looking for uranium and they weren’t very much interested in coal, so my family acquired the project from them. We made a deal with some Canadians and sold the project to the Canadian company, Mogul Ventures, in exchange for cash and shares in their company. That’s how we ended up in control of the project.
What we’ve done over the last nine months is hire SRK as our independent consultants to write a 43-101 report. We did a limited exploration program – 13 drill holes in September. Everything has been done to 43-101 standards. We assayed the cores and came out with a maiden resource, and we also achieved a significant milestone recently where we received all approvals and signatures for conversion of our exploration license into a mining license. This gives us a 70-year tenure on the project, extendible by another 40 years. That’s also significantly de-risks our project because the timeline is extended, and we only need some limited amount of additional approvals to be able to build a mine there.
We are now in the position to go and get the company listed on the Exchange. We’ll be raising some capital at that point in time and aggressively push forward with the exploration program.
Chris: Wow, you’ve taken a lot of risk off the table early on, you don’t see that often in these types of deals.
Jamul: Exactly. But, we don’t just have coal on the property. We have a very interesting copper and magnetite system that needs further exploration. Surface grades are very high, with some of the rock chip samples coming up with 6% copper. We would like to do some additional exploration and see if there are actual copper deposits to be discovered.
Chris: That’s all under Mogul Ventures?
Jamul: Mogul Ventures owns all mineral rights within the 34,000 hectares of the concession. The mining license that Mogul Ventures is getting covers all minerals, so if we happen to discover copper we just have to write a feasibility study for the copper and we’ll be permitted to mine the copper.
Chris: In terms of the geographic location, are you going to be able to access these resources and get them to market relatively easily?
Jamul: We are positioned quite favourably. We’re only 90 kilometres south east of a regional hub and rail port, the town of Choir. It has the Trans-Mongolian Railway and loading facilities, storage and an excellent infrastructure. Choir is emerging as a transportation hub, with trucks and deliveries to mines in South Gobi. It’s a pretty good location for Mongolia, which is a vast country with limited infrastructure. The topography is flat. You can easily build gravel roads, so trucking the 90 kilometres to rail is easy.
Chris: I guess you’re not dealing with mountains and other treacherous or challenging terrain.
Jamul: Yeah, particularly the region we’re in has a lot of similarities to Western Australia, for example. It’s a bit colder (laughs) but we also don’t have truck drivers making $200,000 per year, so it has its pluses and minuses.
Chris: Western Australia is booming, but remember they are literally tens of thousands of kilometres from their end users. Australia is at the forefront in terms of resources, but they have significant obstacles to overcome with respect to transportation, especially relative to Mongolian resources. The costs involved in getting resources from Western Australia by truck and rail to ports, and then shipped over to Shanghai are significant, certainly compared to next-day delivery from the Gobi.
Jamul: Well, the numbers speak for themselves. If you look at coal, Mongolian coal exports were basically zero 5-6 years ago. As of 2011 I think it’s something like 22 million tons projected to grow to over 40 million tons in the next two years.
We probably will become a 100 million ton exporter in the next 13-14 years or so. The numbers will speak for themselves. Coal, in particular, even iron ore – we’re closer to the market so we’re likely to continue to be the low cost producer.
We have location being a favourable factor but also the deposits in Mongolia are different. In Australia and a lot of other places the easy, cheap deposits have been taken out 100 years ago. In Mongolia that’s not the case.
Chris: Yeah, the fact that you had Stalinist rule for such an extended period of time has left the place untouched. Now you’ve got that trigger mechanism which has changed the political structure and the economic climate. It’s really ramping higher and higher every day. The numbers are mind boggling when you look at them. It’s really dramatic and unprecedented.
Jamul: When you compare Mongolia to countries in South America or Africa there’s also one very big difference. We have higher literacy rates than even the United States. Basically we have a 100% literacy rate. Most kids complete their secondary education and then something like 18-20% of them proceed to post-secondary education. It’s certainly a highly literate and increasingly educated population, which makes it quite different from comparable places around the world.
Chris: Indeed, very important. Also I think the overall political stability – as I mentioned before you have these tensions. Literally if you look across the world at frontier markets, a common theme is a country which is on the low end of the spectrum with regards to literacy rates, high levels of poverty and low education. They get exploited and then the tensions rise because hiring locals is problematic. If you’re hiring a local as an “engineer,” for example on an oil/gas project, and that local can’t read and write then you’ve got a serious problem. Those are the issues that arise in Africa, but it’s not an issue prevalent in Mongolia.
Jamul: Yeah, and because they are literate they’re all politically empowered, so you simply cannot come into Mongolia and dispossess people. It’s just not going to happen.
Chris: Jamul it’s been a real pleasure speaking with you these last few days. We’ll catch up with you again soon to see how things are progressing.
Jamul: Very good, Chris. Looking forward to it.
——–
Jamul did a great job of helping us understand a bit about Mongolian history (the real story), politics and international relations. We also got a glimpse of some of the opportunities he’s looking to capitalise on.
Let us know if you enjoyed this series, and please feel free to refer a friend or ten!
Have a great weekend.
- Chris
Greencore: Highlighting Mongolian Voices On Environmental Degradation
February 26 (RisingVoices) Greencore.org is an NGO from Mongolia which conducted a survey in Matad soum of Dornod Aimag between April to October 2011. The project engaged local people who participated in filling out CRC (Citizen Report Cards) which contained 13 questions on how they think about the environmental degradation in this area. The reports were primarily shared in their blog which is in Mongolian languages.
The project aims at ensuring citizens oversight and monitoring on extractive industry revenue and identifying how the extraction industry understands its social responsibility and accountability of reporting their revenue. (more here)
The findings and results of the project were also disseminated through different media including Rising Voices grantee Nomadgreen's
blog and this would be the key step towards ensuring the social accountability, transparency in extractive industry and the company social responsibility and developing fairness.Destruction of the Menen steppes:
Briton discovers new section of Great Wall of China (in Mongolia)
“We definitely need more research,” he said. “We are already planning another trip.”
Senior Client Manager / Executive Director
Email: mogi@cpsinternational.mn
P Please consider the environment before printing a copy of this email.
Suite 1213 · Level 12 · 2 Sukhbaatar Square
No comments:
Post a Comment