I Told You to Buy Mongolia!

madhedgefundtrader's picture Submitted by madhedgefundtrader on 10/08/2010 22:32 -0500

CopperGross Domestic ProductNASDAQPE MultipleUnemploymentUranium

I have been pounding the table on Mongolia for over a year now, as the fundamentals were stacking up nicely for it to become a high growth pioneer market (click here for the call at http://www.madhedgefundtrader.com/september_2__2009.html ). Never mind that you can’t buy it unless you become a resident of Ulan Bator and pay with local currency.

But the indirect plays I recommended are doing extremely well, including Ivanhoe Mines (IVN), up 93% in a year, and Rio Tinto (RTP), up 53%.  Government officials were in New York this week negotiating with NASDAQ to take over the management of their nascent exchange, which even after the double, has only 300 listed companies with a total market capitalization of only $1 billion.

There’s nowhere I won’t go to make a buck, so I had to sit up and pay attention when friends in Tokyo told me that the next big Asian equity play will be in Mongolia. Genghis Khan’s ancestral land has enormous mineral resources which make it a natural commodity play (did he know?), and it has one of the world’s most GDP friendly population pyramids.

But incompetent government administrators with antiquated Soviet era sentiments managed to kill every development opportunity in the crib with onerous windfall taxes and harsh joint venture restrictions. The resources stayed in the ground. National elections finally turned over the regressive administration in 2008, and the anti growth tax regime was dumped last week.

Mongolia has inked a deal with Ivanhoe Mines and Rio Tinto to develop the massive Oyu Tolgoi mine, the world’s largest undeveloped copper resource, which could lead to a doubling of the GDP in five years. We’re talking a gigantic 450,000 tons of copper and 330,000 ounces of gold a year. Friends have been e-mailing in the results of core drillings from Oyu Tolgoi, and it is clear that this is one of the richest ores ever discovered. Also on tap is the development of huge coking coal and uranium deposits.

The spillover benefits for the rest of the economy would be substantial.  Now that visas are no longer impossible to get, as they were in my day, my Japanese and Chinese speaking trilingual son tells me that Ulan Bator has become the trendy place for American college grads fleeing unemployment at home.

Who knows? Give me a low enough PE multiple and I might even develop a taste for the country’s national dishes, sheep brains and fermented mare’s milk.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at http://www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

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by TheGoodDoctor
on Fri, 10/08/2010 – 23:22
#637294

Been looking to get into a bit of IVN.

Login or register to post comments by MileMarker17
on Sat, 10/09/2010 – 09:26
#637711

Go for some EGI rather than IVN.  More bang for the buck over the next two-three years, IMO.

 

http://www.entreegold.com/

Login or register to post comments by AnAnonymous
on Sat, 10/09/2010 – 02:10
#637424

Speaking Chinese in Mongolia? A sure win.

Son must be a customer of Ulan Bator ring of prostitution. How impressive it is to watch the one million + Ulan Bator be flooed by girls coming from the other 1M mongolian population.

Only point worth any consideration: the former USSR satellites are the only places left for hope of expansion as they were out of the optimal pattern of exploitation due to Commie Grand Daddy.

The joke: them exporting their finite assets and doubling their GDP, that unambigous measure of wealth, is going to be good for Mongolia. Great. 

Login or register to post comments by williambanzai7
on Sat, 10/09/2010 – 02:20
#637428

Mongolian women are interested in meeting hedge fund traders.

Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 08:04
#637536

william,

like to see what you have in mind for that image……..if possible, of course.

Login or register to post comments by williambanzai7
on Sat, 10/09/2010 – 08:17
#637550

Some Mongolian women playing traditional Chinese instruments

MW

Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 09:09
#637652

why, thank you william. i’ll take 2, please, and the 1 in the middle. more than 1 is still allowed? the Khan knew how to do it right…….wonder what the kids will look like???

some parts of mongolia are described as much like Wyoming of 100 years ago…….nice taimen and greyling fishing too, i know.

Login or register to post comments by Lets Hang Parliament
on Sat, 10/09/2010 – 10:29
#637803

And not unlike Montana either – big skies and very few people. Ulaanbaatar is a complete shithole however and makes Detroit look like Palm Springs or in UK speak Wolverhampton/Tunbridge Wells! They may have the mineral wealth but absoltely zip infrastructure. 30 miles outsude UB there are no roads; no railways; zip! So the only way out is via China ( they speak Mongolian or Russian not Chinese) or Russia so that will be a huge drain on profits. Corruption endemic but an absolutely beautifully stunning country ex UB. Cant we just let them get on with their wonderfully simple way of life?……

Login or register to post comments by williambanzai7
on Sat, 10/09/2010 – 13:40
#638130

 Cant we just let them get on with their wonderfully simple way of life?……

You know the unfortunate answer to that question.

Login or register to post comments by mcarthur
on Sat, 10/09/2010 – 09:34
#637721

I spent a month in Mongolia four years ago attempting to secure rights to some uranium exploration properties.  The mineral potential is huge but so is the corruption.  They failed to realize that any NYSE listed company must abide by the Foreign Corrupt Practices Act which meant we simply could not slip these guys a fiver under the table.  For an interesting case study you should review the saga of Khan Resources. 

The Mongolians hate the Chinese but tolerate the Russians and they are simply too incompetent to develop their own resources.  And UB is a smog choked hell hole with one nice Irish pub.

 

Login or register to post comments by kaiserhoff
on Sat, 10/09/2010 – 10:02
#637760

But other than that, how did you like it?

MHFT has finally hit his stride.  Mongolia is the perfect place for him.

Login or register to post comments by arthur darrell
on Sat, 10/09/2010 – 09:46
#637735

umm how ya transport any of that stuff? there’s no infrastructure in them their hills

aka no trains!

Login or register to post comments by mcarthur
on Sat, 10/09/2010 – 10:05
#637764

 

Nuff said…

http://ubpost.mongolnews.mn/index.php?option=com_content&task=view&id=52…

Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 10:28
#637796

Clinton scored off of that list – read Kazakstan – with Frank Guistra’s contribution to The Foundation – pays to have dictators of resorce wealthy countries take personal calls.

I think P Munk of American Barrick said the same about former CAD PM Mulroney when asked why AB had BM appointed to the board; he knows every 3rd world dictator on a first name basis – or something to that effect.

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