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  • Mongolia Growth Group: Profiting From The Land Of Luxury Blue Sky Promise [View article]
    Anyone that has spent any time following events in Mongolia know that any so called "reform agenda" the GOM comes up with amounts to a joke as they never really follow through with any of it and past history has shown that it can also change rather quickly. The problem is the current government in Mongolia and until it goes or their are some drastic changes to it, investors will be staying away as they have been.
    A number of authors on SA have written articles on Mongolia and Mongolian companies. Among them are Jon Springer, the late Emmet Kodesh and Gary Bourgeaurt. Their material provides good insight into the problems business faces in Mongolia.
    Aug 12, 2014. 09:36 PM | Likes Like |Link to Comment
  • Mongolia Growth Group: Profiting From The Land Of Luxury Blue Sky Promise [View article]
    As evidenced by the continued drop in foriegn investment and the continued drop in the currency, the government has done Zero as far as anything of substance to reverse the trend in foriegn investment and how they treat foriegn investors. Lots of words yes but as far as real action, it has amounted to less than zero as they have actually made matters worse. More corruption, more difficulties for foriegn companies actually trying to do work in Mongolia about sums it up.
    Aug 12, 2014. 04:48 PM | 1 Like Like |Link to Comment
  • Mongolia Growth Group: Profiting From The Land Of Luxury Blue Sky Promise [View article]
    The government has not shown that it has learned anything. Its action are quite negative and far different than its words. You mention the drop in investment in 2012 but they have had the same problem in 2013 and so far in 2014 as well. The foriegn investors await some real positive action and so far what I have seen from the GOM amounts to less than zero. After the election in 2016, the story may start to change.
    Aug 12, 2014. 04:43 PM | Likes Like |Link to Comment
  • Mongolia Growth Group: Profiting From The Land Of Luxury Blue Sky Promise [View article]
    Any one making an investment in Mongolia needs to be very very careful and realize that their is a lot of risk.
    The biggest problem in Mongolia is a government that regardless of what they may claim is not very foriegn investment/ foriegn business friendly, suffers from a high degree of corruption, and has a tenancy to do an about face on economic policy with no reason or rhyme. The result of these government problems has been that foriegn investment has dropped drastically, foriegn currency reserves are dangerously low and the country is getting close to needing an IMF bail out.
    An example of the problems in Mongolia can be found by looking at Rio Tinto's large mining development with Turquoises Hill Resources in the south Gobi Desert. Rio Tinto has postponed development of phase 2 of this project due to disputes with the Mongolian government. This is a huge deposit which when fully developed would account for 30% of Mongolian GDP and phase 2 is required to unlock 80% of the value of this deposit (underground part of the mine). Yet the GOM continues to cause issues with moving forward. Their are many other companies that have also had problems due to the GOM and Mongolian corruption - many covered in SA article.
    A better option for those looking at investing in Mongolia would in my opinion be to wait to see what happens during the upcoming 2016 election. The current government that has done nothing but drive the economy into the ground and chase foriegn investors away should hopefully get booted out and be replaced with a more business friendly government.

    The above is my opinion based on following the political and economic situation in Mongolia for about 10 years now.
    Aug 12, 2014. 03:46 PM | 2 Likes Like |Link to Comment
  • Keystone carbon pollution could be more than estimated, study says [View news story]
    what you have here is another bogus junk study by a biased group that should be tossed in the trash can. The reality is that that not building the pipeline is more harmful to the environment than building it. The oil will be produced regardless and the alternate shipping methods (rail, increased capacity on older pipe lines etc) are less safe and more carbon intensive that this new state of the art pipeline.
    Aug 11, 2014. 10:39 AM | 3 Likes Like |Link to Comment
  • Why Betting On ArcelorMittal Is A Bad Idea [View article]
    With MT, I see more positives than negatives and view the current weakness as a buying opportunity. I am long MT recently bought in near current price. There are considerable one time charges in the first half of the year results (to the tune of around 400 million). This in itself tells you that the future should be better all things being equal.
    MT because of their world wide presence is in a unique situation that IMO gives them some good advantages over other in the integrated steel business. The purchase of Thyssens Atlantic sea board plant is an example (cost Thyssen 14 billion to build - bought by MT and partner for 1.5 billion). It made no sense for Thyssen because it was dependent on Brazilian slab which went from being among the cheapest in the world to among the most expensive. It makes a lot of sense for MT as they can source slab from many different places. My understanding is that under MT this plant is improving with operating rates approaching 80% and IMO it will be quit profitable for MT.
    They have used the slow down in the steel market to rationalize operations throughout the world, cut costs and make selective investments at attractive prices. These actions should reap considerable rewards going forward.
    With Iron ore, in North America I believe unlike Asia, they are still using yearly contracts and as well, you have North American pricing as opposed to Asian pricing. The prices do follow each other as far as up and down are concerned but are different due to shipping costs, landlocked production etc.. For MT, the fact that they are buying on contract for their furnaces means that changes in ore prices have a lagging effect on the cost of iron production. Its a double edged sword which means that during falling ore prices, the furnaces are consuming more expensive iron ore for a while and during rising prices, the furnaces enjoy cheaper ore for a while. In the long run, its a wash and the only thing that really counts at any point in time as far as Iron ore is concerned is cost of producing it as opposed to selling price.(In other words - is it profitable or not) Note that there are accounting rules around internal company sales be it iron ore ore anything else - basically these sales have to be done at comparable market prices at the time of the sale.
    MT is also in a good position to supply its European operations with Iron ore from eastern Canada which would displace the expensive ore these operations currently use. This puts Iron ore profits even if reduced in MT's pockets rather than someone else. Also increasing capacity of the existing mines should lower per ton costs as they will be utilizing a lot of existing infrastructure thus driving efficiencies.
    MT produces over 20 million tons of steel a quarter and looks at the most cost effective way of supplying its furnaces with iron ore and if that means buying from another producer while it sells its own production to someone else, then that is what they will do. The bottom line is that they produce far more steel than they produce Iron ore and are in a unique position to further grow iron ore production and use it to maximize efficiencies within their own operation because of their global presence.

    Although it make take some time, I see far more positives with MT than negatives.
    JMO
    Aug 8, 2014. 12:27 PM | Likes Like |Link to Comment
  • ArcelorMittal: Why I Hold What I Hold [View article]
    With Iron ore, in North America I believe unlike Asia, they are still using yearly contracts and as well, you have North American pricing as opposed to Asian pricing. The prices do follow each other as far as up and down are concerned but are different due to shipping costs, landlocked production etc.. For MT, the fact that they are buying on contract for their furnaces means that changes in ore prices have a lagging effect on the cost of iron production. Its a double edged sword which means that during falling ore prices, the furnaces are consuming more expensive iron ore for a while and during rising prices, the furnaces enjoy cheaper ore for a while. In the long run, its a wash and the only thing that really counts at any point in time as far as Iron ore is concerned is cost of producing it as opposed to selling price.(In other words - is it profitable or not) Note that there are accounting rules around internal company sales be it iron ore ore anything else - basically these sales have to be done at comparable market prices at the time of the sale. JMO
    Aug 6, 2014. 10:02 AM | Likes Like |Link to Comment
  • ArcelorMittal: Why I Hold What I Hold [View article]
    Its not as straight forward as what you state. MT produces over 20 million tons of steel a quarter. MT looks at the most cost effective way of supplying its furnaces with iron ore and if that means buying from another producer while it sells its own production to someone else, then that is what they will do. The bottom line is that they produce far more steel than they produce Iron ore. There are also accounting rules for how they have to account for internal sales. The short of it is that they have to charge their own companies comparable prices to the market rates. More important to the equation is MT's cost of producing iron ore. As long as it is less than the selling price, then it is an overal positive for them. JMO
    Aug 6, 2014. 09:48 AM | Likes Like |Link to Comment
  • ArcelorMittal: Why I Hold What I Hold [View article]
    i am long MT recently bought in near current price. There are considerable one time charges in the first half of the year results (to the tune of around 400 million). This in itself tells you that the future should be better all things being equal.
    MT because of their world wide presence is in a unique situation that IMO gives them some good advantages. The purchase of Thyssens Atlantic sea board plant is an example (cost Thyssen 14 billion to build - bought by MT and partner for 1.5 billion). It made no sense for Thyssen because it was dependent on Brazilian slab which went from being among the cheapest in the world to among the most expensive. It makes a lot of sense for MT as they can source slab from many different places. My understanding is that under MT this plant is improving with operating rates approaching 80% and IMO it will be quit profitable for MT.
    They have used the slow down in the steel market to rationalize operations throughout the world, cut costs and make selective investments at attractive prices. These actions should reap considerable rewards going forward. JMO
    Aug 5, 2014. 10:05 AM | 1 Like Like |Link to Comment
  • ArcelorMittal: Why I Hold What I Hold [View article]
    Note that Iron ore makes up only about 10% of its business and in MT's case a lot of it goes to feed its own operations. Iron ore does have an impact on MT but not as much as the market would like to think. JMO
    Aug 5, 2014. 09:55 AM | 2 Likes Like |Link to Comment
  • ArcelorMittal's (MT) CEO Lakshmi Mittal on Q2 2014 Results - Earnings Call Transcript [View article]
    I would not hold "Cautiously Optimistic" against him in any way or read anything into it other than it being a politically correct term that will keep the company out of court.
    They had a number of 1 time items that impacted them negatively to the tune of around 400 million and so this tells me the next quarter should be far better. They also got a very good deal on the operation they bought on the Atlantic sea board (cost 14 billion to build and bought for 1.5 billion) which they seem to be making good progress on. They have made good progress on rationalizing the European operations and also have a number of strategic projects in the works through out their global operations.
    While the rest of the industry battened down the hatches and tried to ride the slow down out, MT used it as an opportunity to streamline operations, cut costs, buy assets at fire sale prices and build a better company.
    I used yesterdays share price drop to increase my position by 30% near the lows and if it continues south in the weeks ahead will buy more.
    They are the worlds biggest steel company with synergies, a large research department, and some world class steel plants others can only dream of. Yes I know that they also have some pretty run down operations (especially in the USA) as well but they have far more strengths than weaknesses.

    JMO
    Aug 2, 2014. 12:22 PM | 1 Like Like |Link to Comment
  • An End To Our Relationship With Yahoo, A New Era For Equity Research [View article]
    I never used Yahoo and visit SA on a daily basis. Yahoo is very main stream and you can get that info anywhere. SA is unique in many ways with some very good authors. JMO
    Aug 2, 2014. 08:46 AM | 5 Likes Like |Link to Comment
  • Falling steel prices will hurt earnings, ArcelorMittal warns [View news story]
    The headline is misleading - read the articles to find out what they really said. Anyway - picked up some more near the low today. Worlds largest steel company with lots on the go in terms of projects and managing costs. They own the best mills in North America and have been using the slowdown over the past few years to their advantage in restructuring the European operation and making strategic purchases. IMO - should provide a very good return going forward.
    Aug 1, 2014. 09:15 PM | 1 Like Like |Link to Comment
  • TransCanada expects to file for Energy East pipeline permit by August [View news story]
    Alberta can produce enough oil to keep Keystone, Energy East and Enbridge's pipeline to the west coast full so I say bring it on!!! This will be the least politically sensitive pipeline as all the provinces to the east have more or less said they support it. Mind you, i suspect that the green clowns from BC and the US will be moving their noise making and junk science East and North.
    Jul 30, 2014. 04:13 PM | 2 Likes Like |Link to Comment
  • Will Turquoise Hill's Time Ever Come? [View article]
    Nice article Gary.

    IMO - The biggest problem with TRQ is the GOM which has shown to be very inconsistent with its policies and does not seem to want to honor its contracts. The GOM's actions have caused the Mongolian economy to tank and the currency to drop as foriegn investors stay away. Rio Tinto is a very large well experienced miner and if they can not make a world class project work in Mongolia then most other companies would not have a snow balls chance in hell. This mine when fully developed will be huge part of the Mongolian economy and would be responsible for 30% of Mongolian GDP. It may take till the next election in 2016 for this to get sorted out as the current government has made zero progress and in many ways has actually gone backwards (phase 2 is on hold and the tax dispute is headed for arbitration).
    The agreement was negotiated by the previous government (MPRP) after over 2 years of negotiations and consultation with many world class mining and financial experts and is viewed by most as a very good agreement all around for all parties. The problems started when the DP won the last election with a minority and rather than form a coalition with the MPRP (as had been done previously) decided to form a coalition with some of the more radical nationalistic parties. The resource minister is a member of one of these other parties and a stanch unapologetic resource nationalist.
    Rio Tinto's Sam Walsh has been very clear on where Rio Tinto stands stating that Rio Tinto expects its projects to be profitable through all stages of a resource cycle and that Rio Tinto invested with a long term view and needed stable government policy and frame work. (not his exact words but close enough).
    My read is that the people of Mongolia are getting tired of paying the economic price for the GOM's incompetence and that if things do not change soon the DP and its partners will not do well come next election and we should hopefully see a more business friendly government.
    As for Mongolia nationalizing the mine, you can never say never but it does not make a lot of sense for the following reasons
    1) Mongolia does not have the expertise to run or build such an operation as the underground (80% of value) requires block caving technology and only the top miners on the planet can do this efficiently.
    2) Nationalization would mean that Mongolia would be relying on the Russians or Chinese to operate this mine - Something Mongolia and its people are not keen on.
    3) The agreement the mine was built under is a very strong and comprehensive agreement enforceable in international courts and so nationalization would be a very expensive proposition for Mongolia that would take generations to pay off. 50 billion in compensation to Rio Tinto and the minority shareholder would not IMO be an unreasonable number.

    What we have here amounts to a huge world class deposit with a huge payoff for all parties involved including the people of Mongolia when things finally get sorted out. The biggest looser currently are the people of Mongolia who are paying the economic price for the GOM's actions and incompetence.

    JMO
    Jul 29, 2014. 08:39 AM | 6 Likes Like |Link to Comment
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