Mongolia Weekly Update Archives 01: July 18 to October 3, 2011

Nov. 26, 2011 8:33 PM ET
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Jon Springer's Blog
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Asia, Emerging Markets, frontier markets

Contributor Since 2011

I write about emerging and frontier markets in Asia. I now primarily contribute work to Forbes Asia. My most recent work and my complete bio can be found on Forbes Asia's site: If it is easier, you can find my recent work sorted by country on this Seeking Alpha blog: You can follow me on Twitter here: You can find me on Linked In here (I accept 98% of connection requests): I would like to thank Seeking Alpha's editorial staff for giving me a start in this profession. In particular I would like to thank George Moriarty and Eli Hoffman. I will contribute still to Seeking Alpha from time to time as the opportunity presents itself. The picture is a young man pole-vaulting a bull in Pamplona, Spain, as part of the festivities around the annual running of the bulls. "Play with the bull, avoid the horns."

Archives have names at the top and date at the bottom of each post. These are prior posts from the dates indicated. To search the posts for particular data or companies use control-F on PCs and command-F on Macs.

For current posts, as well as a list of companies operating in Mongolia, a current list of articles by the author, and current author disclosures, please go to Mongolia Weekly Update.


Jon Springer

Comments (1001)

Surveying recent news: 

1a) From the Washington Post. This is a great map of Mongolia and China showing current and future railways, as well as China's current and future use of coal from Mongolia: 

1b) Washington Post July 16, 2011, article - "China, rich with coal, seeks more next door in Mongolia to meet its energy needs" - discussion of security/diversification reasons for building rail in directions other than China; extensive comments from MOGLF.PK (Mongolia Mining Corp) executives: 

2) Excellent summary opinion piece by Jonathan Manthorpe in the Vancouver Sun, "Mongolia Works To Avoid the Curse of Resource Wealth" (also has lengthy discussion about local group "Fire Nation" led by the jailed Tsetsegee Munkhabayar which resists aspects of mining development):

3) Article on CNBC about Mongolia:

This article quotes Alisher Ali of Silk Road Management. He is one in the same Alisher Ali who works for Eurasia Capital (a local brokerage company) and appears in the Al-Jazeera TV clip above.

Hunnu Coal which has been mentioned above by GUNNS and is mentioned by Ali in this article is not listed in the U.S. currently (which makes it ineligible for Seeking Alpha articles). It is listed in Australia and can be tracked on Yahoo with the ticker HUN.AX 

4) Blue Wolf Mongolia Holdings, a blank check company, just had its IPO led by DeutscheBank, ticker is MNGLU...

I know nothing about MNGLU beyond what you can read in these articles. It looks like they are primarily in existence to accumulate natural resource properties in Mongolia with the proceeds from the IPO and that management comes from Venture Capital organizations.

5a) Junior coal miner Lucky Strike (LKYSF.PK) signs agreements for licenses for coal exploration properties in Mongolia.
Company site:

5b) Junior miner Gulfside Minerals (GMGLF.PK) has had funding issues for coal properties in central Mongolia and gone to Lucky Strike for funding help.
Company site: www.gulfsideminerals.c...

6) Manas Petroleum (MNAP.OB) is conducting seismic surveys for Gobi Energy and expects to drill in 2Q 2012:
Company site:
Article: explorationanddevelopm... 

7) Side effect of a growing economy, growing prostitution - article: 

8) Centerra Gold (CAGDF.PK) - 4.34 billion market cap - has high grade gold find in northeast Mongolia:
Company site:

Disclosure: I neither own nor will purchase a position in the next 72 hours in: CAGDF.PK, GMGLF.PK, HUN.AX, LKYSF.PK, MNAP.OB, MNGLU

18 Jul, 09:07 AM

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Matthew Rappaport

Comments (21)

These updates have been clutch. Thanks for all the info. This article has been an invaluable resource.

18 Jul, 10:08 AM

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Peter Epstein

Comments (249)

No one can de-throne me in my knowledge of the company SouthGobi Resources, but John Springer is setting the bar quite high in keeping us informed about news on Mongolian coal companies. Great job.

The map of current and future rail lines is important. Not because it tells you much about where future rail lines will actually go, but because it is missing a handful of rail lines and rail links that the private Mongolian coal start-ups show on their maps!

I was told by reliable sources that proposed or future rail lines are only meant to be estimates. In China, the route is surveyed and planned and homes get moved out of the way and the thing gets built. In Mongolia, a proposed route is chosen because there has to be one in the application. However, for legitimate and not so legitimate reasons the route is always subject to change.

For example, if an up-and-coming city is on the proposed main route, but 3-4 years later that city has not flourished, but another city has, then there's a reason for the rail line to go to the other city instead. This is over-simplifying things, but you get the idea.

This is a real problem for the start-ups, because they may be promised that a rail line is coming 100km northeast of them, but in the end it doesn't come nearly as close as they were told. Perhaps the start-up is building a rail spur to meet the proposed future main line and it comes up a mere 100km short. That is a company breaker.

18 Jul, 11:20 PM

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Jon Springer

Comments (1001) 


Thank you for that color.

What's your sense of how reliable the rail construction will be, for example, in a case like Aspire's where they are footing 500 mill of a 1.7 bill rail construction project?

Your point for the more junior miners I think is pretty clear.

(source for the Aspire question appears above, but here it is again for ease: )

18 Jul, 11:34 PM

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Peter Epstein

Comments (249)

I don't have specific knowledge of Aspire's plans. I would say that since SouthGobi owns 19.9% of Aspire, they will have a help in the process. Not only does SouthGobi have experience and connections in Mongolia, but SouthGobi's 57% owner Ivanhoe Mines has 10 years of experience and much greater connections.

19 Jul, 09:35 PM

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Jon Springer

Comments (1001) 

Thanks for the insights as always GUNNS !

On a separate note to all...

1) I will be in Mongolia Sept 11 to Sept 23. After that, I will hopefully have an article or two to write as follow ups.

2) I have been trying to put together enough information for a follow-up article prior to going as well, but if I don't have enough added information for an article - and I don't at this time - I will continue to post updates in the comments section here until then.

3) If there are any questions that anyone would like better answers to while I'm in Mongolia, please feel free to let me know over the next 7 weeks and I'll do my best to get them all answered.

19 Jul, 10:34 PM

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Comments (4)

Hello Mr. Springer. Please read my comment and if you will, try to get more info on the apparent long delay on drilling to depth and beginning to produce. Petro Matad could be the next big driller for the region, but I still can't find anything saying they have any completed Wells or are producing. Thanks and have a safe journey.

22 Jul, 05:01 PM

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Jon Springer

Comments (1001) 

Thanks for the comment and question Robodiver. I'll see what more I can find out about Petro Matad when local.

23 Jul, 09:56 AM

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Comments (4)

Thanks again. This is a great site. Your work is appreciated.

27 Jul, 01:26 PM

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Jon Springer

Comments (1001) 

A very nice person kindly forwarded me this lengthy Bloomberg article. The article touches on the political growing pains of Mongolia and the invasion of foreign money and hedge funds:

21 Jul, 11:57 PM

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Comments (2858)

Interesting article - thanks for the link.

22 Jul, 12:14 AM

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H. T. Love

Comments (8295)

Very good article. Puts some perspective on the opportunities and concomitant risks.

Makes me hope that the country can benefit from what has been learned in other places as sudden economic prosperity looms, with all its problems as well as potential benefits.


22 Jul, 06:02 AM 

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Matthew Rappaport

Comments (21)


Just wanted to commend you for the excellent work you have put into the article and the comments.

Did you see the offering of Blue Wolf Mongolia Holdings (MNGLU.PK) the other day? What are your thoughts?

My sincerest appreciation,


22 Jul, 09:19 AM

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Jon Springer

Comments (1001)

Greetings Matthew,

Thanks for all your kind comments. I posted a little bit about MNGLU on July 18, its #4 in the 8 point comment.

I don't know much about them. I know their IPO was to raise money to invest in Mongolia. From their SEC filing, it looks like they would invest primarily in natural resources in Mongolia, but according to their filing they can pretty much invest in anything they want. It looks like management (by reading the filing and Googling the names involved) are primarily gentlemen who have worked for well known venture capital firms in the past. Their share price has ticked up to $10.45 from the IPO of $10 which is good news for initial investors who also have warrants at $12.

If they are investing primarily in natural resources, they would need to spend some money developing properties. If not, I don't know what they're doing and I can find no presentations or company website for them as yet. Everything is vague except who is involved. Clearly, there is some presentation out there somewhere or they wouldn't have 70 million to work with. I'll post on them again when I figure out more. Apologies for the long winding answer that has few answers.

23 Jul, 10:12 AM

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Moon Kil Woong

Comments (7484)

There are only a bit more than 3 million people there. The steppes will be fine as long as there are no RE in them and as long as they block too much immigration. Mongolia needs to be sensitive to a mass influx of Chinese who could in the future try to force a re-integration with China. Of course, Mongolia like Taiwan is very sensitive to this already.

22 Jul, 02:22 PM

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Comments (4)

I'd like to know a bit more consencus on PETRO MATAD Ltd. PRTDF.PK This is the oil company owned By Mongolia. I have worked in the Gulf of Mexico for 15 years. I read articles of how this company was on site and poised to complete drilling into 30 billion in oil 60 miles from the China border and that China was interested in buying ALL they would sell. Now this sounds like a no brainer, BUT, they were supposedly shut down on brutal, sub-zero winter and yet here it is the end of July and not peep has come out from ANY source I could find on if they had ANY WELLS COMPLETED? It doesn't take that long to complete a well at those depths and conditions of materials being drilled into. Also, cold or no cold, we drilled in Alaska did we not? If Anyone could spare a minute, please elaborate on this company a bit more that a claim to be the first Publicly trader company. Please email me at Thanks

22 Jul, 04:58 PM

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Comments (4)

Hello to all. Great article. I have a general question for anyone knowing something about Petro Matad LTD. PRTDF.PK They are mentioned in the article as claiming to be the first Mongolian company to be publicly traded. As I was researching last winter about this State owned Oil Company, I learned they were sitting on large oil deposits and that China had $30 Billion on the table waiting for the completion of the wells in their well known fields. Supposedly, this oil is not very deep by modern standards and is only about 60 miles north of China and that the pipeline is underway. Yet I've heard no mention of any wells completed to date. I understand they supposedly shut down for weather but here it is the end of JULY and still nothing??? Alaska and other cold climates have been drilled and produce. I am hoping that because I don't read the Mongolian language that I am missing something here! Could the author of this article please pursue this topic of Petro Matad a bit more than as to their status as first to be traded publicly? I've worked in the Gulf of Mexico for 15 years and I have never heard of it taking this long to complete a well. Thanks and any comments are welcome. Or email me at

22 Jul, 05:00 PM

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Jon Springer

Comments (1001) 

Some news items from the past week about Mongolia. Still want to check a few more sources, but here's a go round: 

1) Erdene Resource Development (ERDCF.PK) announces drill results: 

2) Japan has either complained about the “Tavan Tolgoi West” bidding or it has not: 

3) The London Stock Exchange fights to be part of the “Tavan Tolgoi East” IPO: 

4) Article suggesting that Russia is using Mongolia’s dependence on Russia for fuel to put pressure on Mongolia for resource access and its stake in Tavan Tolgoi: 

5) Opinion piece dotted with quotes in The American Conservative about “the Mongolia question” and if the U.S. is doing enough to build ties with this player in natural resources: 

6) King Stone Energy (YNSKF.PK) (or 0663.HK) acquires a coal miner in Mongolia. I know nothing about this stock except what is linked below and it is thinly traded in the U.S.:
King Stone’s website:

7) President of India takes a 7 day swing to visit South Korea and Mongolia to focus on bilateral relations. Article primarily focuses on South Korea, but the point remiains that Mongolia was put on the travel docket:

Please note, as I almost made the mistake today when reading an article, that “Inner Mongolia” is actually in China, and the country Mongolia is a distinct entity.

In the next 72 hours, I will be buying no shares of any companies listed in this comment.

25 Jul, 01:25 PM

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Jon Springer

Comments (1001) 

Must read for anyone investing in Mongolia or coal by Peter Epstein (formerly GUNNS in these comments):

27 Jul, 09:42 AM

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Comments (5305)

This is for you, Jon:

27 Jul, 10:05 AM

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Jon Springer

Comments (1001)

 Thank you for the excellent link OG !

Clarifying the above:

- Peter's article discusses estimates for production for "Tavan Tologi West" which may (or may not) have been won by China Shenhua, Peabody, and a Russian-Mongolian group. This portion of Tavan Tolgoi is being sold to a foreign consortium by the government.

- The Mineweb article from OptionsGirl is discussing deals made for "Tavan Tolgoi East" (aka Erdenes Tavan Tolgoi; aka the Tsankhi deposit) which is traded on the Mongolian Stock Exchange as TT, will remain 50% state-owned, is the stock that each Mongolian citizen is being given 538 shares of, as last I heard was paying an 18% dividend, and is planning an IPO in Hong Kong and/or London that will be led by Goldman Sachs and Deutsche Bank.

28 Jul, 12:24 AM

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Peter Epstein

Comments (249)

Thanks Jon for the link to my article. I would have greatly preferred to pitch SouthGobi Resources in that piece as they are the clear winners in Mongolia. However, SA is very serious about the content that they publish. They want only U.S. listed companies.

27 Jul, 12:06 PM

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Peter Epstein

Comments (249)

Yes, thank you again Jon, that is indeed the case an important distinction to make.

28 Jul, 09:30 AM

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Peter Epstein

Comments (249)

A masterpiece, please see this article on SouthGobi,

28 Jul, 11:25 PM

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Jon Springer

Comments (1001) 

Here’s some news from the past week related to Mongolia (and one item older than a week). I do try to put the most relevant items for investing at the top of the list.  

1) Centerra Gold (CAGDF) short article about their recent gold find in Mongolia (deposit test results by end of the year) and TV interview with their CEO about it (though the interview talks more about their mine in Kyrgyz Republic as the CEO says their mine there is 25% of the Kyrgyz economy; last minute of interview is about Mongolia’s growing pains):

And Bloomberg/Washington Post discusses Centerra’s dividend increase: 

2) Update on the “Tavan Tolgoi West” deal for China Shenhua, Peabody, and Russian-Mongolian consortium waiting on President Elbegdorj’s approval from Shanghai Daily: 

3) Entrée Gold (EGI) has results on its Nevada property. This has nothing to do directly with Mongolia, but EGI is listed in the above article because it does business there, and anyone invested in EGI or interested in doing so should know about all their operations: 

4) European Bank for Reconstruction and Development estimates Mongolian economic growth will be 9% this year and 12% next year: 

5) Annual multinational military exercises in Mongolia (since 2003) include “the United States, Japan, South Korea, Australia, Canada, India, Germany, Indonesia, Cambodia and Singapore.” Notice that China and Russia are not involved and a lot of strong economies from far away are. 

6) Follow up on India’s Prime Minister’s visit. Highlights: $20 million credit extended by India for “India-Mongolia Joint Information Technology, Education and Outsourcing Centre”; and a defense co-operation agreement. 

7) Article from the Asia Sentinel on July 13 about President Elbegdorj that I just came across (thorough discussion of Mongolia’s international relations): 

8) Article on traveling to Mongolia by the authors of the new edition of Lonely Planet Mongolia (first new edition in 3 years). “The capital, Ulaanbaatar, is awash with Hummer and Wi-Fi hotspots.” 

9) Mongolia might become a place countries dispose of spent nuclear fuel (Green group and Facebook page protesting this mentioned as well):

And an article stating the Obama administration supports this: 

10) “28 July 2011 - Dolgor Chuluunbaatar, the editor-in-chief of Mongolia's Ulaanbaatar Times who was imprisoned in March for the alleged illegal privatization of a newspaper, was released on bail today on the grounds of poor health according to human rights organization Globe International.” 

11) Britain, Germany and Mongolia in dispute over the extradition of a Mongolian security official:

31 Jul, 11:01 AM

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Mercy Jimenez

Comments (305)

Jon, great Mongolian updates. Since I am long BTU I especially appreciated the ShanghaiDaily article. Many thanks.

31 Jul, 11:22 AM

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Comments (5)

Thanks for the article, i am newbie to stocks. I want to invest in Ivanhoe Mines but their stocks have been in the $20's for a while. If they are going to be owning much of the gold in Mongolia, why haven't their share prices gone up yet? Do you think it's wise to buy IVN shares and what happens when Rio Tinto buys most of the IVN shares? Thanks in advance!

31 Jul, 04:08 PM

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Jon Springer

Comments (1001)

Thank you for the note Nomins. 

Gold mining stocks have generically been trading poorly. Legendary investor Jim Rogers has written and stated that in a commodities rally, the underlying commodities (e.g. gold) rally in price far better than the providers of it (e.g. gold miners) until the commodity price peaks; and that commodity provider stocks (e.g. gold miners) will peak in price AFTER the underlying commodity (e.g. gold) peaks.

While I don't totally concur with Rogers theory, the results in my portfolio currently do. I own a lot of both precious metals, and precious metals miners, and I can see the difference (with the metals themselves far outperforming the struggling miners).

IVN specifically has other issues.

a) The tangled web of ownership over Oyu Tolgoi with RIO is an ongoing saga. Most recently, an executive with RIO was appointed to IVN's board:

b) Oyu Tolgoi is and will be impressive but is not in production yet.

c) I don't think the market totally buys into Mongolia yet

d) I don't think the market yet knows how profits from Oyu Tolgoi are going to hit the bottom line of IVN and RIO yet, and want to see the numbers after productions is ramped up

As for whether or not to buy IVN:

a) I would expect some pull-back in the price of gold (and silver) when the debt ceiling agreement is done

b) I would expect this will hurt the price of mining companies and might create a good buying opportunity

c) full disclosure from me: My last purchase of IVN was on May 6, 2011, at $24.22. However, the average cost of the rest of my shares is below $15, and I am not good at market timing.

As with my own family and friends, I cannot give you advice on what price to buy at or tell you if you should buy a stock; I can only tell you what I've done and what I think. I hope this information helps you make a profitable decision.

1 Aug, 11:33 PM

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Comments (5)

Thanks so much for your detailed reply. So in your opinion, what stocks would be best to invest in that is directly linked to Mongolian Oyu Tolgoi's process?. Many Mongolian companies seem to be starting to go public. Is it really wise to buy shares (which would be awesome because they are listed at dirt cheap price) when the country has no experience yet in stock market and public trading?.

4 Aug, 11:55 PM

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Jon Springer

Comments (1001) 

Greetings Nomins and all,

I haven't had internet or news access since August 2 while visiting Yellowstone the last few days, so please bear with me this coming week while I catch up.

The 4th "question" in the 8/7/2011 Ask Kuppy post is somewhat relevant to Nomins question here. It discusses the experiences of a reader opening a brokerage account in Mongolia and provides some insight into where local markets are at: adventuresincapitalism...

Answering your question (Nomin's) specifically...

- I'm going to Mongolia September 11 to 23 to figure this out better.

- Mining businesses have a lot of variable (production costs, commodity costs, gov't agreements, etc)

- There are not a lot of Mongolian based companies publicly traded yet... most still only trade on the Mongolian Stock Exchange. We should not confuse international companies doing business in Mongolia with Mongolian companies.

- While there will definitely be money made by mining companies in Mongolia, and I am following and will probably invest further in the mining side; there may be even more money made by those who sell the picks and axes, the "Levi's", the housing, the housing construction, the railroad construction, and the other infrastructure that needs to build up around the burgeoning mining industry.

The trip to Mongolia will hopefully create better data streams on the risks of investing in Mongolia, and future investment opportunities there, and articles on these topics.

In light of the last few days of trading and S&P's action Friday evening, things are unpredictable at the moment. I clearly called the market's reaction to the debt ceiling agreement wrong. A lot of stock prices look like bargains, but they're only bargains if they don't keep going lower. I'm holding my IVN and MNGGF (which has a lock up expiring August 9 this week). For further Mongolia investments, I'm waiting until I go on my trip to Mongolia at this juncture.

7 Aug, 02:49 AM

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Comments (5)

Also, if you don't mind my bothering. What happens if you own IVN shares and RIO Tinto tries to buy most of IVN shares. Wouldn't the price of the IVN shares soar?

4 Aug, 11:59 PM

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Jon Springer

Comments (1001) 

Well, part of why I own IVN is a thought that RIO might buy them out... but no guarantees there. If RIO bought IVN, one would assume it would be at a good premium. However, IVN has a lot more properties than just Oyu Tolgoi, and this is no simple deal.

7 Aug, 02:12 AM

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Jon Springer

Comments (1001) 

News of the past week: 

1) Ivanhoe (IVN) CEO Friedland thinks his stock is worth more than double current value. Rio Tinto can increase their stake in Ivanhoe to 49% with options this January.

AND a piece on Friedland at Australia’s Diggers and Dealers forum:

AND Ivanhoe won this year’s Diggers and Dealers “digger of the year”: 

2) Petro Matad (PRTDF.PK) reports progress:

3) Entrée Gold (EGI) reports 2nd quarter results: 

4) Peabody (BTU) article on which discusses global coal demand and the Tavan Tolgoi East bidding uncertainty: 

5) Blue Wolf Mongolia Holdings (MNGLU)

a) Holders may trade their stock shares and warrants separately:

b) Geologic Resource Partners has bought an 8.7% stake in the company (although article is in error on how much was raised by MNGLU in IPO, as it was oversubscribed and they raised $80.5 million, not $70 million):

c) I have tried calling this company (MNGLU) to get more information. Ten days and no returned call. Their phone number is 203-524-5272 which previously got me to an operator who forwarded me to a voice mail box. As of today, the phone number is not functioning either. Their “profile” page on Yahoo Finance has been taken down when I checked for it this morning.  

6) A Mongolia Opportunities fund – a private equity closed end fund – is open to subscription through June 2012 (2nd fund in this article):

AND the fund’s website (which has some translation issues): 

7) An article on recent goings on at “Tavan Tolgoi East” and “Tavan Tolgoi West” that suggest problems with the west’s bidding process may cause problems for the east’s IPO:

AND Tavan Tolgoi makes an initial ceremonial shipment to China; price of coal sold to China is currently below market value of coal: 

8) Patchwork quilt article bullish on Mongolia from notes in item #2 that Citibank sees a group of young emerging market countries including Mongolia as poised for “catch up”:

AND the above article's longer piece of source material from 

9) Also from, 100,000 apartments to go up in Ulan Bator after workforce training: 

10) China constructing special port(s) to import coal from Mongolia:

11) Ulan Bator Railways reports financial improvement; explanation of Mongolia's railways relationships with Russian Railways:

12) An Op-Ed in the Indian Express positive on India’s president’s recent visit to Mongolia and the construction of further ties with Monglia:

AND India’s president speaks glowingly of Mongolia (scroll down for article on this link – lots of ads): 

13) U.S. VP Joe Biden will visit China, Japan, and Mongolia on Asian trip. Article says little more than that. 

14) Al-Jazeera (video) reports that slums are developing around Ulan Bator. However, this report is at least somewhat misleading as the “tents” people live in are traditional Mongolian gers which, as you can see at the end of the video, are pretty nice inside:

15) Final note. Apologies for some long posts responding to recent questions. I become wordier when tired. I hope you all have a profitable week trading.

8 Aug, 09:31 AM

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Jon Springer

Comments (1001) 

Top half of this Mark Anthony article deals with energy problems in China (particularly coal) relevant to Mongolia investors: 

Also, catching up on Peter Epstein's work:

- Vietnam has raised the tax on their coal exports by 20% (his additional comments on future limitations of exports from South Africa and Indonesia is noteworthy):

- Coal company production shortfalls (Aug 4):

11 Aug, 09:18 AM

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Comments (5)

Thanks for your valuable input. Have a safe trip to Mongolia. That is actually my hometown, though i haven't been back for about 3 years. IVN sunk to $19 some dollars last week and now back to over 20's. Still watching and will be investing soon. What are your thoughts on ETT?. Supposedly, Mongolian citizens are to pay 5000 tugrug (equivalent to 5$) to receive their 536 shares. Word has it that many citizens that aren't familiar with stocks are reluctant to spend the 5$ to purchase what they call "empty piece of paper". If people aren't educated, the riches and the stock experts will take advantage of this and i am afraid this will read to riots+unrest in the country. As to how that will affect the ETT, i am not sure. Just thought i'd share. Keep safe and send my regards to my homeland.

12 Aug, 08:49 PM

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Jon Springer

Comments (1001)

Mongolia news from the past week -

1) Tavan Tolgoi east (the one the gov’t is keeping 50% of) has named two contractors: Australia’s MacMahon Holdings Ltd. (MCHHF.PK) and Germany’s BBM Operta (that’s all this short 1st article says)… and then in the 2nd article MacMahon is denying the deal is done but confirms negotiations:
Not a done deal:
MacMahon’s website:
BBM Operta’s website: 

2) The drama around the bidding for Tavan Tolgoi west is far from over (CSUAY.PK and BTU seemed to be the winners before things became murky). This article from this past Friday in the UB Post with State Property Committee chairman D.Sugar indicates that there were misunderstandings that this bidding process was over:

3) Ivanhoe (IVN) 2nd quarter report. They keep reminding us they’re ahead of their schedule on Oyu Tolgoi: 

4) Erdenes Tavan Tolgoi (Tavan Tolgoi east) and Ivanhoe/RioTinto’s Oyu Tolgoi mine have signed an agreement to build a thermal power station in the Gobi vicinity between the two mines: 

5) South Gobi (SGQRF.PK) 2nd quarter report.
Reuters opinion of SouthGobi’s report: 

6) briefs on the progress of Petro Matad (PRTDF.PK) oil exploration: 

7) The first three oil refineries are being built in Mongolia, the first is slated to be completed in 2015:
or may be completed in 2014:
and construction is confirmed by Shanghai Daily:

8) Khan Resources (KHRIF.PK) 3rd quarter report. Something worth tracking, “Activities related to the International Arbitration action against the Government of Mongolia accelerated during the third quarter with the formal constitution of the presiding Tribunal on May 9, 2011. A first procedural hearing was held on June 21, 2011. The second hearing is scheduled for September 19, 2011 to assess whether the action should be split into a jurisdictional component and a merit component or continue with a single combined jurisdictional/merit component.” 

9) Lucky Strike Resources (LKYSF.PK) is drilling coal properties in Mongolia.

10) Prophecy Coal (PRPCF.PK) clarifies their 1st quarter report: 

11) Guildford Coal (can’t find it on U.S. exchange, but trades in Australia) is acquiring coal in the South Gobi:

12) has a general article on Mongolia which mentions that Mongolia has 16.77% of the world’s rare earth reserves according to a 2009 U.S. Geological Survey (2nd only to China): 

13) Eurasia Capital (a local brokerage house) is bullish on the Mongolian economy even when it takes into account current global problems. If you register at you will get updates like this one via e-mail, here reprinted by Registration has no cost or obligation to open an account. Their Mongolia Weekly and Mongolia Daily updates at the bottom right corner of the home page also are handy. Anyway, Eurasia’s bullish stance letter is here: 

14) The Mongolian General Government Budget (GGB) is running a surplus through the 1st 7 months of the year:

And, Mongolia industrial output (as well as rail traffic) is increasing:

But, exports were US$2,341.6 million with imports of US$3,442.4 million, making for a trade deficit: 

15) Also from, Mongolia by the numbers 2008-2010 by year (birth rate, GDP, currency in circulation, imports, exports, etc):

16) says unemployment in Mongolia is rising, and is up to about 1.5% (not a typo, one and a half percent): 

17) Mongolia is planning to begin construction on a nuclear power plant next year to be completed in 2017. And, China Daily adds that Mongolia has 60,000 verified tons of uranium in the country:

The ever useful cites this article from Mongolian language that the availability of skilled local manpower for this nuclear project could be a problem:

18) The president of Korea is coming to visit Mongolia. These articles says nothing about it, but I wonder if the bidding on Tavan Tolgoi west will come up in conversation: 

19) The UB Post is discussing the challenges of the Mongolian water supply: 

20) Mongolia could be a wheat exporter this year: 

21) Perhaps only interesting to me, in Inner Mongolia (which is in China) they have mapped the genomes of the Mongolian horse, Mongolian sheep, Mongolia cattle, and Alxa Bactrian camels:

15 Aug, 01:46 AM

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Jon Springer

Comments (1001) 

Correction: the item in #12 states that Mongolia has the 2nd largest deposit of rare earths after China. After consulting with the expertise of the rare earths blog here, we're pretty sure that is grossly inaccurate. The data was likely counting rare earths from "Inner Mongolia" which is part of China, and not "Outer Mongolia" which is the independent country of Mongolia and/or conflated the two together. Mongolia, the country, has minimal amounts of rare earths. Furthermore, I have only seen one company that claims to be primarily in the business of rare earth mining in Mongolia, but I believe that company's greatest strength is issuing press releases, not mining, and have avoided mentioning them in this space to-date. 

This is the US Geological Survey of Mongolia from 2009:

Many thanks to Tripleblack for educating me on this topic.

15 Aug, 08:56 AM

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Valley Boy

Comments (1336) 

Geologic potential for both Inner Mongolia and Outer Mongolia are much better understood than they used to be.

There is some suggestion of rare earth availability from the Mushugai Massif in the Gobi Desert of southern Mongolia.

15 Aug, 12:23 PM

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Jon Springer

Comments (1001) 

Excellent VB ! Thank you so much for digging those resources up (no pun intended). I will take all the corrections and amplifications I can get from the rare earth experts.

15 Aug, 01:02 PM

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Valley Boy

Comments (1336)

It's just my way of indicating thanks for your instablog, Jon. I think the instablog is a lucky find.

I first got interested in Mongolia by watching the movie "Mongol" at the local theater several years ago. It's now on youtube with English subtitles. The landscapes portrayed in the movie are probably richer than anyone imagined at the time.

15 Aug, 01:51 PM

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Jon Springer

Comments (1001) 

Quote from Mark Anthony's comments:

"China is already looking into Mongolia (the Republic of Mongolia, not just Inner Mongolia) to import coal. But Mongolia exported 12M tons of coal to China in 2010. That's a big amount for Mongolia, but a drop in the bucket for China's 3.4 BILLION TONS annual demand. It is simply lacking in all aspects: the scale of coal mines, and the road system, making it impossible for Mongolia to quickly ramp up its coal export to China.

"Let's face it, China, burning 3.4 BILLION TONS of coal a year, and asking for 10% more each year, simply could not find enough extra coal supply any where in the world you look. Coal is bullish globally.

"BTW, China has just exceeded USA in electricity produced and consumed. China's problem is its electricity generation rely too heavily on coal, instead of diversified like the USA.

"If you visit many Chinese cities, you see the countless air conditioning units hanging outside windows of individual resident households. People have become wealthy enough to purchase such air-conditioning units to provide them animal comfort. But such units are energy inefficient in comparision with centralized air-conditioning for the whole buildings, which is virtually non-exist in most new Chinese buildings. That is just one part of Where China's insatiable energy appetite came from.

"Remember China has nearly 5 times the US population and yet still consumes about the same amount of electricity, meaning their people only consumes 1/5 of electricity of how much an average American consumes for animal comfort. So there is still a huge room for growth. 

"The Chinese might have the money to buy the same kind of comfortable living condition that Americans take for granted, but the world does not have enough resource to satisfy the demand."
Quoted from here:

19 Aug, 10:46 PM

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Peter Epstein

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This is a very good and up to the minute update of Chinese coal imports.

By James Wellstead – Exclusive to Coal Investing News

Chinese coal imports continue to rise on strong demand, despite continued high met and thermal coal prices. While China has one of the world’s largest reserves of coal, high transport costs and low coal quality have increasingly force China to seek international suppliers to meet booming coal demand.

July coal imports in China surged by 36 percent to 17.53 million tonnes, topping the previous record of 17.34 million tonnes in December of last year. The increase comes on the back of the largest energy shortages in seven years in China as the country continues to struggle to quench its growing thirst for coal. As a result, the growing demand from Chinese coal imports (China became a net importer of coal in 2009) to meet this need carries significant weight in setting world prices, an impact which is set to increase.

To put China’s demand in perspective, in 2010, China alone accounted for 48 percent of global market volume, up from 45 percent in 2009. Worldwide global coal demand is set to increase by 55 percent between 2007 and 2035 with non-OECD Asian countries (including China and India) will account for 95 percent of the projected increase in world coal consumption.

For 2011, China’s projected coal demand growth rate is expected to be 9.7 percent, with a longer term growth rate of between of between 5 and 8 percent (depending on estimates). This means China would double its demand for metallurgical and thermal coal in less than ten years, taking total consumption to over 6 billion tonnes per year. While imports currently constitute a small percentage of total coal supply, about 5 percent or 150 million tonnes in 2011, congested transit systems have and high transport costs are set to be a decisive factor in determining the contribution imports will make in China’s coal supply.

Transport Costs

Rail, truck and ocean transit are the crucial components in supplying Chinese coal within its own market. With much of domestic coal resources located in North-Central China (predominantly Shanxi, Shaanxi and Xinjiang provinces) and major industrial demand hubs located along the southeastern coast, transport costs currently make up more than half of delivered costs for domestic thermal coal in the southern provinces.

Increasingly high transport costs, in concert with the increasing cost of sourcing typically low quality, underground coking and thermal coal from within the country pushed China from a net coal exporter into an importer in 2009. Despite vast distances of suppliers from Australia, Canada, Indonesia and the US, lower production costs sourced (typically) from surface miners have been able to supply Chinese customers at a lower cost.

Import estimates exaggerated?

While imports are currently on the rise, officials from Deutsche Bank stated that “owing to ongoing improvements in China’s rail capacity and production increases particularly in Shanxi and Inner Mongolia,” claims of thermal coal imports doubling to 200 million tonnes by 2015 are unfounded. Instead, “net imports of thermal coal will remain stable just above the 100 million-tonnes level, instead of rising significantly in the next five years,” Deutsche Bank officials continued.

However, such projections were not supported by Hao Xiangbin, a senior official with the China Coal Industry Association, who felt that the planned VAT and port fee reductions will be necessary to encourage coal imports to meet rising demand, projected at 3.73 billion tonnes for 2011.

Regardless the exact figure, imports will be necessary to meet Chinese thermal and coking coal demand. Steven Feldman of SouthGobi Resources (TSE:SGQ) stated in an interview with Coal Investing News that while Chinese rail infrastructure in the north is currently sufficient to handle growing demand, “China has diminishing sources of high calorific, shallow coking coal.” Further, Feldman explained that costs aging and increasingly deep mines create environmental and operational costs that make Chinese sourced coal less competitive.

As a result, low cost coking and thermal coal from Mongolia, Australia and even Canada will remain attractive sources to many Chinese customers. Recent news of rising thermal prices this July due to rising freight costs of as much as 3 percent in transit from China’s leading coal port Qinhuangdao, gives greater importance to the decision to reduce value-added tax and port charges (more than 20 percent of the final cost). These dynamics, principally the question of transport development and capacity, will continue to play a deciding role for Chinese coal imports.

19 Aug, 11:04 PM

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Valley Boy

Comments (1336) 

It looks like international interest in Mongolia's coal is heating up, that is for sure.

20 Aug, 09:49 PM

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Jon Springer

Comments (1001) 

Weekly Mongolia news roundup. Company specific news at the top of the list. Three articles relating to China and its coal and energy demands are at the bottom of this list (along with one American coal issues article).  

1) Tavan Tolgoi West bidding (BTU) (CSUAY.PK). This Reuters articles claims that confusion has been “cleared up” and that South Korean and Japanese bids are still on the shortlist for the bidding process. I think that’s an interesting notion of “clear”:

2) Aspire (ASPXF.PK) “is pleased to advise that 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”: AKM)_Ovoot_Coking_Coal_Highly_Attractive_To_Global.html'>

3) Prophecy (PRPCF.PK) has discovered it has more coal: 

4) Erdene Resources (ERDCF.PK) (joint projects with Xstrata as well (XSRAY.PK)) provides corporate update: 

5) Ivanhoe Energy (IVAN) (not IVN) announcing the spudding of an oil well (i.e. they started drilling):

6) Garrison International (GITLF.PK) acquires the Nalaa coal-uranium prospect in Mongolia (with big thanks to Valley Boy for originally pointing this out above): www.winnipegfreepress.... 

7) Petro Matad (PRTDF.PK) drilling results report makes it over to Proactive Investors and Interactive Investor

8) East Asia (EAIAF.PK) provide corporate update on their activities, including some mining in Mongolia, although their major mining operations are in Indonesia:

9) TVN Corporation (listed in Australia as TVN.AX) has drilling results from their thermal coal project in Mongolia:

10) General Mining Corporation (listed in Australia as GMM.AX) is drilling for potash in Mongolia: www.proactiveinvestors...

11) Frontier (a Mongolian brokerage house) and the EBRD commenting on Mongolia’s need for infrastructure, and that a lack of infrastructure is what confines Mongolia’s growth at a conference:

12) Mongolia’s Minister of Mining speaks about the importance of foreign investors and assuring them that stability and transparency are priorities at the same Frontier conference:

13) $5.5 billion railway project planned to be implemented in Mongolia: 

14) Hyundai (HYMTF.PK) or (HYMLF.PK) is now the biggest seller of passenger cars in Mongolia. This is not a big marketplace for passenger cars, but…:
Hyundai’s Worldwide site:

15) Mongolia is building oil refineries to build up their oil supply: www.proactiveinvestors...

16) Local bank XacBank has secured U.S.$300 million in financing: asia.legalbusinessonli...

17) Stan Grant of CNN reports from Mongolia. There was an article that he will be doing reports from there this coming week, and I found these reports he did in May (videos):

a) Profile piece on Mongolia’s President:

b) Embedded video in this article is Stan Grant talking to Mongolia’s Prime Minister:

c) Mining mania changing Mongolia:

d) Article saying to watch for Stan Grant’s reports in the coming 

18) American V.P. Joe Biden visited Mongolia. There’s well over 250 articles about this. I have looked at 5 and chose these 3.

a) Biden praising Mongolia for having a democracy. Article then discusses “Tavan Tolgoi West” deal as a done deal to put in Mongolia’s importance to American company Peabody into the article. Also mentioned a small group of protesters and the possibility that Mongolia will store Japanese nuclear waste in Mongolia:

b) Bloomberg’s article, more geopolitics and stats, notable (to me) discusses that Mongolia maintains good relations with both South Korea and North Korea:

c) AFP article by Michael Kohn. Michael Kohn is the author of Lonely Planet’s Mongolia guides for the last decade, is married to a Mongolian and lives the majority of the year (he’s from California) (and yes, I would like to meet him when there, if either he or someone he knows is reading this): 

19) South Korea’s President was in Mongolia at the same time as Joe Biden. South Korea and Mongolia were working on improving bilateral ties:

20) I will just miss the Invest Mongolia conference September 8 and 9:

21) Angela Merkel will visit Mongolia in October:

22) Desertification problems in Mongolia:

23) Bloomberg article, “Chinese Coal Imports Climb 36% on Power Demand, Sxcoal Says” (thanks to Mark Anthony for the link):

24) Article translated from original Chinese using Google translate (expect some lumpy language), “China 70 million kilowatts power gap year after CEC called on development of hydropower”, opening salvo of the article, “The estimates, by 2013, China's power shortage will reach 70 million kilowatts.” (thanks to Mark Anthony for the link):

25) Washington Post/Bloomberg article on the Environmental Protection Agency’s actions impacts on U.S. domestic coal production:

26) (not from this week) Casey Research article on the global outlook for coal from 6/23/11 by Casey Research (posted by Mark Anthony elsewhere):

Odd vocabulary word of the week: Glamping. Glamping = glamourous camping. Apparently this is become a “thing” worldwide. It came up in a Mongolian tourism article discussing staying opportunities to stay overnight in a very well-equipped yurt/ger with folks bringing you food and waiting on your needs. I will not be glamping in Mongolia.

Thanks for the comments, articles and links this week to: Peter Epstein, Valley Boy and Mark Anthony.

Disclosure: Long MNGFF.PK, IVN, XSRAY.PK. I will likely sell my whole position in XSRAY.PK this week, possibly today depending on market action. I sold a small portion of my shares in IVN late last week. I have no position in any other stocks mentioned here.

22 Aug, 09:03 AM

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Peter Epstein

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Tavan Tolgoi, (TT) Revisited.....WHY is PEABODY DOING THIS?

Richard Garchitorena, CFA and Sean Wright, CPA, both analysts at Credit Suisse, just returned from an on-site visit with the CEO of Peabody Energy, (BTU). They write in a research report as follows,

"BTU has a proposed 24% interest in the TT project, with the other partners being the China Shenhua Group (40%) and a Russian-Mongolian consortium (36%). The company expects we could get some announcement from the government on final ownership structure by the end of the year, which should be a catalyst. BTU does not expect to have to pay an upfront cash payment at this time."

The analysts continue,

"As a reminder, Tavan Tolgoi is a 1 billion ton coal reserve in Mongolia with up to two thirds of the reserves estimated to be varying grades of metallurgical coal. Current expectations are for a 15 million tonne per year operation with the potential to increase to 30 million tonnes. They will primarily mine the Western block, with development likely to take at least 5 to 7 years."

This update from the CEO of Peabody confirms what I suggested in this recent article.

Peabody said that the achievement of 15mm tonnes of project level coal will take, "at least 5 to 7 years." This is even longer than I opined in my piece. And, the boldface and underlined portion above notes that the 15mm tonnes will be a mixture of thermal, semi-soft and hard coking coals, a fact that I didn't touch upon.

The world is closely watching Mongolia, Mozambique, and a few other emerging coking coal exporters for vast incremental supply that I feel is not coming anytime soon. From the Credit Suisse analysts comments, if it takes 6 years to get to 15mm tonnes and just 10mm of that is coking coal, where is the anticipated 50mm tonnes of Mongolian coking coal by 2015-16 going to come from? Mongolian Mining will be shipping 8-10mm tonnes of coking coal and in 5 years SouthGobi will be producing about 12mm tonnes.

To reiterate my view from the article that I wrote a few weeks ago, assuming that Peabody controls 24% of 15mm tonnes of production in 5 to 7 years, that's only 3.6mm tonnes per year, with only two thirds of it coking coal! SouthGobi will be doing 3x-4x that amount. Mongolia has only 2 coal producers of any size, SouthGobi Resources and Mongolian Mining. Fast forward 5 years and these two will still be the dominant coking coal producers in Mongolia, the country that everyone is watching and waiting for great things to happen.

What on earth is Peabody thinking? They will spend the next 5 to 7 years running in place and burning cap-ex dollars for 3.6mm tonnes of production, when instead they could control 3x-4x that amount by acquiring SouthGobi outright. Peabody could probably takeout SGQ, at a 6.5x 2014 EV/EBITDA multiple by issuing $1.25b of stock and $1.25 billion of low cost debt. As a kicker, Peabody would pick up a 19.6% interest in Aspire Mining, which has as much blue-sky potential as any coal producer in all of Mongolia. Aspire is something that Peabody could sink its teeth into and turn into a world class coking coal asset. A 6.5x multiple is not that high compared to the 8x multiples being paid for Macarthur Coal and Riversdale Mining.

Peabody has a choice, they can be stuck in a quagmire of epic proportions, or they can control their own destiny by acquiring Canadian-listed SouthGobi at a price that they can comfortably afford.

24 Aug, 04:29 PM

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Valley Boy

Comments (1336) 

I was curious about the extent of California's trade with Mongolia. It turns out that the Port of Tacoma is having more trade volume with Mongolia than our ports in California.

24 Aug, 05:08 PM

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Jon Springer

Comments (1001)

 Weekly Mongolia news roundup. A lot of economic notes this week (#s 15, 16, 17, 18, and 19), as well as signs of increasing movement in private equity funds being raised to invest in Mongolia rising (#s 3, 4, & 5), and notes from Chinese news sources (#s 1, 13 & 14). 

1) China Shenhua (CSUAY.PK) and to a lesser extent Peabody (BTU). China Daily: "[Mongolian President] Elbegdorj said on Aug 20 that because of the pressure of domestic public opinion, he could not support an earlier plan that gave Chinese company Shenhua Group Corp Ltd the largest share of the coal development project [at "Tavan Tolgoi West"], according to Kyodo News service." 

2) Engineering firm MacMahon Hodlings (MCHHF.PK) confirms it has won a joint venture contract with BBM Operta Group "for the mining operations at the state-owned Tavan Tolgoi Coal Mine ["Tavan Tolgoi East"] in Mongolia." CEO Nick Bowen said, ""The progression of the Tavan Tolgoi project now provides a solid foundation for Macmahon, in its efforts to establish a long-term business in one of the world's largest emerging mining regions." Work starts Q1 next year:

3) Mongolia Growth Group (MNGGF.PK) and Blue Wolf Mongolia Holdings (MNGLU) are getting a new competitor from Asia Pacific Investment Partners (run by American businessman Lee Cashell) who "hopes to raise $30m through a placement of stock ahead of an IPO which could come next year.":

Asia Pacific Investment Partners website (which has a profile of Mr. Cashell under the "About APIP" tab in "Our Executive Team"):

Important notes from the blog in the FT:

- Individual flats which sold for $800 per square meter in 2007 are now at $2,200 per square meter

- The Mongolian stock exchange was: up 121% last year in Tugrik and was up another 55% through February; since February it has declined 36% vs. a 16% decline for the MSCI frontier index. 

4) And, in Korea, Doran Capital along with Eurasia (a Mongolian brokerage house) are trying to raise $100 million for Mongolian investment limited partnerships: 

5) "Retired US Army General Wesley Clark chairman of Envidity Inc announced the commitment of funds to launch a USD 1 billion Mongolian Underground Coal Gasification-Gas to Liquids project. The project will transform low quality deeply embedded, underground coal into high quality fuel, and is a first step towards fuel independence for Mongolia."

Envidity's website (seems to be privately held): 

6) SouthGobi's (SGQRF.PK) COO awarded the highest award the Mongolia government can grant to a foreigner by decree of Mongolia's president. The award was giving for development of mining in Mongolia and improving Mongolia-Canadian relations: 

7) Rio Tinto (RIO) has boosted its stake in Ivanhoe (IVN) by 2% to 48.5%:

8) Rio Tinto (RIO), part owner of the Oyu Tolgoi copper-gold mine (along with IVN in which RIO has a substantial ownership stake) is sponsoring the Mongolian Olympic team for 2012. The third article from The Sydney Morning Herald is titled "Beware miners claiming a rich seam of pure altruism" and as you can imagine from the title, is not a pro-mining piece: 

9) Guildford Coal is considering a separate stock listing for its Mongolian coal assets "to take advantage of rising investor interest in the landlocked North Asian country's resources." Guildford is listed in Australia as GUF: 

10) Xanadu Mines (XAM on the Australian exchange) is progressing with drilling to test its resources. Gold, silver, coal, and copper are in their wheelhouse:

11) Blina (BDI on the Australian exchange) is another company with projects (copper-gold) in Mongolia which it is making a separate subsidiary: 

12) "South Korean steel maker POSCO (PKX) will build a coal-gasification plant in Mongolia next year in a 50-50 joint venture with a Mongolian company." Please noted this is a Memorandum of Understanding: 

13) China Daily notes that "Chinese steelmakers are scrambling to buy coking coal mines in Mongolia, China's largest supplier of the fuel. China is the world's biggest steel producer and needs the coke to keep its blast furnaces in operation.": 

14) From China's Xinhua news agency, "Mongolian Prime Minister Sukhbaatar Batbold has said bilateral ties between Mongolia and China are entering a "golden era".":

And from Xinhua, "Deepening friendly cooperation with China in interest of Mongolia: president" - quoting from the article - "China respects the choices made by the Mongolian people and believes Mongolia will take advantage of its strengths and potential to conduct its strategy of revitalizing the country by developing mineral resources and realizing political stability, economic development and improvement of livelihood, [senior Chinese official] Zhou said." 

15) Article on "The Role of the Development Bank of Mongolia [DBM]" Highlights

- "the importance of DBM relating to the development of Mongolian infrastructure in the next 5 to 10 years. Infrastructure has long been the bottleneck of this country. Within the next decade, the need for more infrastructure notably in railway, water supply and power plants will be extremely high. For the sole energy infrastructure, Mr. Byambasaikhan foresees that the required investment may amount to US$4.5 billion. Other types of infrastructures may need an aggregate up to US$4 billion."

- "Mrs. Bolormaa, the CEO of DBM, added that DBM is notably looking forward to cooperating further with local commercial banks in the following areas:

1. Development of the stock exchange and the bond market in Mongolia;

2. Implementation of strategic projects with commercial banks, DBM being on the lookout for syndication and cofinancing opportunities with local commercial banks."

- "four main projects have been identified and assigned priority in areas as varied as construction, energy, roads and heavy industry. DBM also works closely with the government to define the best framework to select and prioritize those projects in term of economic and social impact.": 

16) Mongolia's Finance Minister is interviewed after the announcement that the government how to revise the current budge due to an "unexpected surplus." While additions to the country's reserve fund, social services, and olympic preparations are mentioned, there is no addition to infrastructure spending mentioned: 

Mongolia has raised its interest rates by .25% to 11.75% to curb inflation which is now at 10.1%. Mongolia expects inflation to continue to rise into next year:

Possibly due to inflation, there is now a new 20,000 Tugrik banknote: 

17) "Mongolia does poorly in economic freedom report" Notably low score in "Legal Sturcture and Security of Property Rights", "Judicial Independence", "Impartial Courts", "Protection of Intellectual Property", "Regulatory Trade Barriers", "Costs of Importing", and "Resrictions on Capital Transactions". On the other hand, notably high scores on "Access to Sound Money", "Growth of Money Supply", "Inflation Variability", "Freedom to Own Foreign Currency", "Taxes on International Trade", "Taxes as a Percentage of Exports and Imports", "Official versus Black market Exchange Rates" and "Regulation of Credit Markets": 

18) European Bank for Reconstruction and Development (EBRD) estimates Mongolia's economy will grow by 9% this year and 12% next year. Also noted is that "Mining and foreign direct investment made up 26 percent of Mongolian GDP last year.": 

19) Mongolia is getting advice from the IMF and U.S. on how to improve tax collection: 

20) An interview with Dr. Jonathan Addleton, U.S. Ambassador to Mongolia, about how Vice-President Biden's visit went. He says all the right things: 

21) Professor Bruce Knauft, a cultural anthropology professor at Emory Univestiry runs a project called States at Region Risk (funded by Carnegie) and was recently in Mongolia for a conference at the end of June. "So why study [Mongolia]? Though successful, transitional countries with vast potential need to evaluate the positive and negative aspects of their model to keep from falling backward." Although the country is doing well in the opinion of Dr. Knauft, several concerns were raised at the conference such as: "desertification, pollution, confusion about history and cultural identity, an indelible shift from herding to urban life and perhaps the biggest of all: concern that Mongolia's resources will enrich the elite while leaving the poor behind." Dr, Knauft is positive on Mongolia however and states the reason for holding the conference in Mongolia: ""If you want to have a template for how to improve countries, you want to look at the best-case scenarios or the success stories and not simply the trouble spots.":

States at Regional Risk site: 

22) Canada's Minister of International Cooperation has completed a visit to Mongolia to build cooperation. The minister met with "Prime Minister Sukhbaatar Batbold, Minister of Foreign Affairs and Trade, Gombojav Zandanshatar, Minister of Social Welfare and Labour, Tugsjargal Gandi, and Dashdorj Zorigt, Minister of Mineral Resources and Energy" 

23) The Dalia Lama is visiting Mongolia. The "Dalia Lama" title is actually Mongolian language and means "the ocean of wisdom" as a Mongolia emperor originally titled the Dalai Lama's position in 1578:

Thanks to Peter Epstein for sharing his post that begins "Tavan Tolgoi, (TT) Revisited.....WHY is PEABODY DOING THIS?"

Disclosure: Long MNGGF.PK and IVN. I sold XSRAY.PK last week as I stated I would. I have no position in any other stocks mentioned here.

28 Aug, 04:26 PM

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The 20,000 Tugrik note described in the article above is not exactly new. I have one here on my desk from my visit to Mongolia in August 2010. But most of the ones I saw back then were pretty new - I usually had a pocket full of them after doing 400,000 MNT withdrawals at the post office ATM near my apartment.

6 Sep, 01:52 AM

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Peter Epstein

Comments (249) 

Please take a look-- An interview with the CEO of SouthGobi Resources, a Mongolian coking coal exporter to China....

4 Sep, 10:56 AM

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Jon Springer

Comments (1001) 

Greeting folks. My next weekly news update will be from Mongolia. If you’re in Mongolia and reading this, please send me an e-mail. I would be very happy to meet everyone that I can while there for 12 days. Here’s the news of the week. Pumping three other Seeking Alpha authors in #1, then listed company news, macro data, and errata: 

1) There are four new posts about Mongolia on Seeking Alpha in the last few days:

a) An article by me - Mongolia: Will Peabody Get More, Less, Or The Same Of Tavan Tolgoi?

b) Free Cash Flow 50 published an article about Mongolia Growth Group (MNGGF.PK) “Mongolian Growth Group: A Pick And Shovel But Not For Commodities”

c) Peter Epstein posted this link above; his interview with SouthGobi (SGQRF.PK) CEO Alex Molyneux.

d) John Polomny has a new instablog about the macroeconomic situation in Mongolia, “Mongolia economic growth continues to exceed expectations”:

E-mail Mr. Polomny for information regarding his newsletter that is $49.95/year. Last I knew, there was a free trial subscription. I subscribe and recommend his newsletter regularly (newsletter is 2 times per month when he’s not traveling; no archives access). He has the only independent newsletter I subscribe to that writes about and invests in MNGFF (since the first private placement), but had no prior relationship with the CEO of MNGGF. 

2) Prophecy (PRPCF.PK) –
Agreements to sell 92,000 tonnes of coal to Russia and Mongolia:
Proactive Investors: www.proactiveinvestors... 

3) Kincora Copper (BZDLF.PK) ( has bought out a minority stakeholder in their Bronze Fox copper/gold project in Mongolia. Bronze Fox is located “along the Oyu Tolgoi copper belt”: 

4) Voyager Resources (VOYRF.PK) ( which “plans to aggressively explore and develop resources at the Khongor Copper Gold Project” in Mongolia has according to “stunning copper intersections in Mongolia” in its latest results:

5) Meritus Minerals (MERMF.PK) ( is diamond drilling/testing at its flagship Gutain Davaa property in Mongolia, primarily for gold.

Company lists prior drill results on this page at bottom: 

6) Petro Matad (PRTDF.PK) recent test results at Davsan Tolgoi were judged to be poor by the market though the CEO contends the verdict as the stock made a new 52-week low this past week: 

7) Finnish company Outotec (OUKPY.PK) (OUKPF.PK), “the global leader in minerals and metals processing technology” ( was discussed during Finland’s President’s state visit to Mongolia this past week: - “Outotec has agreed on collaboration with the Ministry of Minerals Resources and Energy of Mongolia (MME) during the visit of Ms. Tarja Halonen, President of the Republic of Finland, to Mongolia today. According to the agreement, Outotec supports MME as a technical advisor to develop mining and metallurgical processing of Mongolian mineral resources in the most sustainable way.”

-More articles about the Finnish President’s visit-

8) China National Petroleum, parent company of PetroChina (PTR), signs a memo with Mongolia to expand petroleum co-operation: 

9) Australia TPL Corporation (TPL.AX) “will raise up to A$1.42 million through the placement of up to 78.9 million shares at $0.018 per share to identify and acquire underexplored and undervalued coal assets in Mongolia.”

10) China Shenhua (CSUAY.PK) “will likely spend up to 19 billion yuan ($2.98 billion) soon to buy assets from its state parent”: 

11) For investors in companies and funds that are investing in real estate in Mongolia (MNGGF.PK, OPP.L, etc.), this article discusses real estate prices (which the government is trying to hold down but the article states), “the history of economic development in other countries shows that in fast growing developing economies that are largely based on mining, housing prices never decline. Instead of price decline following an economic crisis, housing prices competed with economic development and increased even more following an upsurge in petroleum prices on the global market. Qatar and Kazakhstan whose economies are similar to Mongolia are clear examples of this situation. Today, Mongolia is repeating this history, as more apartments are put on market, housing prices are rising. During this year’s second quarter alone, average apartment price increased by 30% and 1m square costs 1.2 million Turgrogs. Prices for good quality apartments in strategic location are twice as high.” Full article: 

12) The Economic Times reports, “higher purchases of coking coal by large countries, from Mongolia, has led to a softening of benchmark coal prices from the traditional coal producing country, Australia.”

13) Noteworthy item to all present and future Mongolia investors. Management ( is launching a Quam Silkroad Mongolia Fund based on “The Silk Road Index” which will be “a global benchmark that tracks the share performance of the 30 largest publicly listed companies with assets and operations in Mongolia.” Here’s the kicker, “The fund seeks to invest mostly in foreign listed companies with exposure to Mongolia and 43% of the fund will be allocated to Ivanhoe mines [IVN].” 43%. Due to a lack of liquidity in the Mongolia Stock Exchange and a limited number of stocks publicly traded outside of Mongolia that do business there, funds such as this one (perhaps Van Eck’s slated future Mongolia ETF) will have to take chunky positions in the more liquid and available stocks to them.

14) Another private equity money to Mongolia story on Mongolia Opportunities Partners ( $75 million fund –

15) Another article about General Wesley Clark’s Envidity (was in last week’s update):

16) Short interview on M.A.D.-Mongolia with M. Batchimeg, the President of Mongolia’s national security advisor. Touches on Tavan Tolgoi and nuclear waste issues. 

17) The Mineral Resource Authority of Mongolia has noted that mining has damaged 4,000 hectares, and they are not done counting yet (the number is expected to nearly double):

18) Here is a new blog I just discovered about Mongolia from someone who works at a one of the larger brokerages in Mongolia:

There are two recent blog entries: one about the build up in transportation infrastructure by the government and by prominent coal companies; and one about Mongolia’s economic growth statistics. In the blog, TT/ETT = Erdenes Tavan Tolgoi (Tavan Tolgoi East); MMC = Mongolian Mining Corporation (MOGLF.PK); SGQ = SouthGobi Resources (SGQRF.PK) 

19) A Financial Times blog that presents a sour view of the performance of stocks doing business in Mongolia on international exchanges, “Mongolian IPOs: hot or cold?”

Catchy headline at a time when global markets are all down for the summer. Listed companies discussed with charts in article: Mongolian Mining Corporation (MOGLF.PK), Centerra Gold (CAGDF.PK) – whose primary operations are in Kazakhstan, Petro Matd (PRTDF.PK), Winsway Coking Coal (1733.HK; only finding listings in Hong Kong and Germany for company).  

20) Articles about the planned IPO of Tavan Tolgoi East in 3 cities (Hong Kong, London, Ulan Bator) –

21) Reuters article on “Key political risks to watch in Mongolia” – Tavan Tolgoi (West deal; East IPO), Populism (is the gov’t getting enough for mining properties; is enough wealth being distributed to population from mining; is the gov’t doing the right things with cash on hand from mining rights sales), and Dependence (trade with Russia and China; need for energy and other imports from them; need to export goods to them):

22) Reuters video report on Mongolia, mining, and the hazards to the environment: productivityapps.itbus...

23) Article in TheAsset.Com “Mongolia approves additional rail links to China” (discusses rail infrastructure and Tavan Tolgoi West bidding):

24) China Xinhua news agency headline, “China, Mongolia economies are highly complimentary: vice president” covering Chinese VP Xi Jinping meeting with Ukhnaa Khurelsukh, secretary general of Mongolia’s ruling Mongolian People’s Party: 

25) Korea’s state-run Development Bank is going to manage Mongolia’s state-run Development Bank for the next four years:

26) UB Post covers and provides a transcript of Mongolia Prime Minister Batbold’s recent interview on CNN (there are a few typos that can be figured out in the article that I’m sure will be fixed shortly):

27) A very vague short article that freedom of the press in Mongolia could improve: 

28) Article on Mongolian government project to construct homes and help buyers finance their purchase in the capitol city. “Currently 24,600 homes are being built in Ulaanbaatar. Over 20,000 new homes are expected to be built every year. We are doing our best to meet the needs and demands.” 

29) U.S. $20 million being distributed to Mongolia soums (their equivalent of counties) who are then to loan the funds to small businesses in their soums: 

30) Habitat for Humanity has built homes in Ulaanbaatar: 

31) The Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah of Kuwait made a state visit to Mongolia:

32) This article about the International School of Ulaanbaatar also has job vacancies at the top of the article, so this site would be worth noting if you ever think about moving:

33) Older. Trying to confirm some other articles, I came across this 20 minute interview of Prime Minister Batbold with Charlie Rose on September 29, 2010 (click on the prime minister’s picture to play):

Note: I will be in Mongolia September 11 to September 23.

Disclosure: I am long MNGGF.PK and IVN. I am not long in any other stocks mentioned in this update, or that are invested in Mongolia to my knowledge, at this time.

5 Sep, 11:21 AM

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Jon Springer

Comments (1001) 

Sam Zell says Mongolia will be the fastest growing economy in the world the next 5 years.

Legendary real estate investor Sam Zell on Bloomberg on August 30th (just found this link today; tip of the hat to the AskFleck community):

(at 6:27 – Colombia and India is where he’s investing now (after that, skip ahead to 10:58 as there’s a blank spot and non-interview news); at 11:45, he says Mongolia is going to be the fastest growing economy in the world the next 5 years; the rest of the interview is certainly interesting and good) 

Don’t normally post mid-week updates, but this should have been in last week’s. Sam Zell's comment also dovetails with item #11 from this past week’s weekly update. #11’s link is broken, here is the new link:

6 Sep, 06:12 PM

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Have a safe trip Jon!

6 Sep, 10:54 PM

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H. T. Love

Comments (8295)


You do a *fantastic* job. I can't wait to get myself positioned to take advantage.

Just wanted you to know that although I have little to contribute, I follow and appreciate what you're making available!


5 Sep, 12:47 PM

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Peter Epstein

Comments (249)

SouthGobi Resources, (SGQ.TO, 1878.HK, SGQRF.PK), the Canadian-listed Mongolian coal producer, announced that it is producing coal at an annual rate of 5.3mm metric tonnes and that production continues to ramp up. In CY 2012, SGQ will mine and sell approximately 7mm tonnes of coal, most of it coking coal. This level of production makes SGQ one of the 2 dominant coal producers in Mongolia.

While much has been written about Mongolia's massive Tavan Tolgoi coking coal deposit, market participants appear largely unaware that SGQ's production profile will dwarf that of the recently announced winning mining groups. For example, Tavan Tolgoi is expected to be operating at 15mm metirc tonnes of coal, about 2/3 of it coking coal, by 2016. Of that amount, Peabody Energy will control 3.6mm tonnes with its respective 24% stake in the project.

By 2016, SouthGobi will be producing 12-13mm tonnes of coking coal, including 3mm tonnes of premium hard coking coal. As such, SGQ will remain 1 of the top 2 producers in Mongolia for many years to come. As a dominant producer in a frontier country that many global miners and steel companies want to get access to, SGQ is a prime takeout candidate.

I believe that within 6-12 months, SGQ will be taken out by a strategic player at a price at least 50% higher than today's closing price, (Sept 6, 2011). The reason for my conviction is twofold. First, like Mongolia, Mozambique is an emerging coking coal exporting country with 2 dominant coking coal companies. There, Rio Tinto just acquired 1 of the 2 dominant players, Riversdale Mining, for an 8.5x 2014 EV/EBITDA multiple. The other major player in Mozambique is global mining giant Vale. Second, the company is known to be for sale. Interested parties are already talking to 57% majority owner Ivanhoe Mines.

Just as many miners are interested in getting into Mozambique, many are also interested in getting a foothold in Mongolia. In fact, Mongolia's coal exports are already running at greater than 20mm tonnes per year, while Mozambique is beginning to export coal in 2h 2011. Mozambique is thousands of kms from China, while SGQ is just 45km from the Chinese boarder. Coal from SouthGobi's mines arrives at Chinese steel mills faster and more reliably than coal from Canada, Australia or Africa.

SGQ is in the early stages of substantial organic earnings and production volume growth. Within 3 years, the company will be exporting at a run-rate of 10mm tonnes of coking coal and generating a run-rate of up to $600mm in EBITDA. Compared to the 8.5x multiple that Rio Tinto just paid for Riversdale Mining, SGQ is trading at less than half that multiple. Sooner or later, perhaps when the world sees how painfully slow the ramp up will be at Tavan Tolgoi, global miners and steel companies will recognize not only how cheap SGQ is, but also its importance as a major strategic coking coal producer serving China's every growing needs.

SGQ is the perfect hedge for the global seaborne coking coal markets. If (when) Australia's coking coal mines get inundated by massive flooding, as they have twice in the past 4 years, SouthGobi's proximity to China becomes even more valuable. Strikes in Canada and Australia are another wildcard for global coking coal supply that is mitigated by SGQ's production on China's doorstep.

As a frontier market, Mongolia has country risk, but this risk is diversified if any of the major players were to acquire the company. The major coal producers have coal mines in countries like Indonesia, Mozambique, Botswana and Colombia. Mongolia is not materially different from these other countries. More important, the process that lead to the choosing of 3 mining groups to mine Tavan Tolgoi involved an initial list of 15-20 parties. Each of the 12-17 mining groups that did not win a place at the table are possible suitors of SGQ as each has accepted Mongolia country risk.

Finally, SGQ's enterprise value of about $1.6 billion makes it digestible for dozens of strategic and financial buyers. Given the proven ability of the global miners to issue debt with fixed coupons of 4%-5% these days, SGQ is a very cheap option on the continued tightness of the coking coal markets. I think that any of the following companies could be interested in acquiring SGQ; BHP, VALE, Anglo American, Xstrata, Glencore, Noble Group, ArcelorMittal, New World Resources, Exxaro, Fortescue Metals, Teck Resources, BTU, Arch Coal or Consol Energy.

6 Sep, 06:48 PM

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Comments (5)

Peter Epstein, do you think the SGQ will be good investment then?. What about the fact that it's pinksheets?, any risk in that?

7 Sep, 04:39 PM

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Peter Epstein

Comments (249)

I trade SGQ in Canada and in Hong Kong through my Interactive Brokers account. SGQ is dual-listed in HK and Canada.

SGQ is a $2b company, I am not at all concerned that it is a pink sheet company in the U.S. The only risk is that the trading liquidity of a pinksheet stock is lower. For example, 16k shares traded today of the ticker, SGQRF. I would buy SGQRF if I did not have access to the Candian or Hong Kong listed stock.

7 Sep, 05:05 PM

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Peter Epstein

Comments (249)

FYI, here's an article that just got posted on SA..

11 Sep, 10:31 AM

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Jon Springer

Comments (1001)

Greetings from Mongolia for the first of two weekly news roundups from the place I’m rounding up the news.

A few things I learned today on my first day in Mongolia that I feel like I should have known:

a) the Tavan Tolgoi deposit accommodate 3 companies plus. There is what I call “Tavan Tolgoi West” which was tentatively auctions off to China Shenhua, Peabody, and a Russian-Mongolia consortium (though that configuration may change). There is what I call “Tavan Tolgoi East” which is what Mongolian citizens each received 536 shares in, and will remain 50% government owned, and will have an IPO sometime in the next year on the Hong Kong, London, and Mongolian exchanges. And then, there is “Little Tavan Tolgoi” which is a stock that traded on the Mongolian Stock Exchange under the symbol TT, but is currently in a lock-up while a share split is pending. And, if you’re not confused by three mines for the same deposit, Mongolian Mining Corporation’s (MOGLF.PK) property is within the borders of the Tavan Tolgoi deposit as well.

b) Privately held Monnis Group (, which is its fingers in many infrastructure pots in Mongolia stands for MONgolian NISsan.

c) other things I learned in 5 hours of meetings today will find their way into articles or blogs when I have been here longer and have a more complete picture

Onto the news of the week: 

1) Banpu PLC (BNPJF.PK) ( of Thailand has made an offer to acquire Hunnu Coal (HUNNF.PK) ( of Australia (who operates primarily in Mongolia). Banpu previously had no presence in Mongolia that I know of. 30% premium. Hunnu board unanimously supports the bid:
Mining Weekly: 

2) Prophecy (PRPCF.PK) has been mentioned in Jay Taylor’s newsletter which Reuters merited newsworthy:

Related video content on Reuters

3) The Oyu Tolgoi mine owned by Ivanhoe (IVN) and Rio Tinto (RIO) is projected to be 1/3 of Mongolia’s GDP by 2020 according to outlets that are also reporting the Mongolian government is considering tightening its grip on these two companies (to add to the government’s 34% stake in the mine):

And thus, a Rio Tinto executive warns the Mongolian government to be cautious in their actions toward mining companies:

4) China’s import of Mongolian coal anticipated to be 30 million metric tons by 2015: 

5) Just another two articles confirming that nothing is final yet about “Tavan Tolgoi West”: 

6a) Erdene (ERDCF.PK) announces results from exploration of surface that’s good enough to drill for further testing:
Winnipeg Free Press: www.winnipegfreepress....

6b) Also, Erdene (ERDCF.PK) adds an experienced board member:

The last paragraph of this article attributes a 10% jump in ERDCF.PK stock price to Mr. MacDonald’s arrival: 

7) Mongolia Growth Group (MNGGF.PK) announces stock options for employees:

8) Petro Matad’s (PRTDF.PK) CEO remains upbeat amidst poor drill results: www.proactiveinvestors...

9) Legal concerns/neuroses about Mongolia’s economic boom. What will happen in Mongolian national elections in 2012? What if the Chinese stop buying from Mongolia? What will happen to a law forbidding mining in some forests and river basins? 

10) An article about Centerra (CAGDF.PK) subsidiary Boroo Gold’s nature friendly rehabilitation of land it has mined, “Boroo spends around USD12 to USD15 million on reclamation.”: 

11) East Asia Minerals (EAIAF.PK) does compliance-based drilling on its uranium property in Mongolia: 

12) “Tavan Tolgoi East” IPO plans for next year: 

13) Prime Minister Sukhbaatar announced that there are plans to do an IPO listing of Mongolian Railways on the heels of the “Tavan Tolgoi East” IPO next year: 

14) Another article written that says Mongolia is supposed to be one of the best places to invest for the next decade:

15) China’s Xinhua news agency reports that China is suggesting there should be a “a free trade area among Northeast Asian countries in order to further boost the economic and trade exchanges in the region… Japan, Russia's far east, the ROK [South Korea], the DPRK [North Korea], Mongolia and China's provinces of Heilongjiang, Jilin, Liaoning and northeastern part of Inner Mongolia Autonomous Region make up Northeast Asia.”: 

16) According to this article, Mongolian companies have evaded about 460.6 billion Mongolian Tugrik in taxes (about $369 million):

17) Envidity, and its chairman Wesley Clark, stay in the news this week. The last paragraph of the article says the company has $120 million on hand and access to $850 million in debt. There’s a lot of other moving parts in this project:

18) Mongolia slides into this article about the “resource curse” that compares Libya to Alaska, scan down to header “Mongolia grapples with ‘curse’” for the relevant part of this CNN news article: 

19) Inexplicably, Mongolia’s stock market makes an appearance in this New York Post column that seems primarily gossip laden. Scan down this article to the header “Yurt in luck!” for the Post’s commentary on Mongolia: 

20) An editorial in the UB Post about the U.S. Federal Reserve and Mongolia’s precious metals wealth in which I, perhaps due to jet lag, cannot follow the logic, although I understand the root of several hyperbolic references as well as allusions to the Mongolian nation’s birth mythology:

Disclosure: I am long MNGGF.PK, IVN, and jet lag.

12 Sep, 12:00 PM

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H. T. Love

Comments (8295)

Wow! Lots to digest! Great job and I look forward to the next one too!

Be safe, try and enjoy a bit while you're there too!


12 Sep, 12:32 PM

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Peter Epstein

Comments (249)

I think that the following Bloomberg News story is very bullish for SouthGobi Resources. Now that Peabody's participation in Tavan Tolgoi has been called into question, they should take a close look at acquiring SGQ instead. Even if BTU maintains its spot on the Tavan Tolgoi West mining team, this news probably means that the project has been pushed back another year. Here's the story.


Mongolia's large mining deal with int'l miners rejected

2011-09-13 15:14:12.336 GMT


ULAN BATOR, Sep 13, 2011 (Xinhua via COMTEX) -- A

tentative investment agreement on giant coking coal deposit

Tavan Tolgoi in Mongolia's South Gobi region has been rejected

by the National Security Council, Mongolian President Tsakhia

Elbegdorj was quoted as saying by local media on Tuesday.

The council, comprised of the president, prime minister

and speaker of the parliament, rejected last Friday the draft

investment agreement with international miners on stake

ownership and production of the deposit.


Early in July, the Mongolian government reached a

tentative deal, under which China's Shenhua Energy Company,

U.S. Peabody Energy Corporation and a Russian-Mongolian

consortium would respectively hold 40 percent, 24 percent and

36 percent of the shares.


However, Elbegdorj said the deal did not meet requirements

of the council nor was it compliant with Mongolian laws and

regulations, thus was submitted to the National Security

Council on July 22 for review. Currently, the giant coking coal deposit is split into five separate sections, and four local companies own mining licenses in the deposit.


Local media assumed the splitting of the large deposit

into smaller parts to be a cause for the rejection and reported

the government is discussing with two licensed private

companies to consolidate their working area with state-owned

Erdenes MGL company.


It is not clear whether the Mongolian government will re-

negotiate with the international bidders for the development of

West Tsankhi area of the deposit with an estimated reserve of

1.2 billion tons -- mostly coking coal used for steelmaking.

The mine is capable of producing 15 million tons of coal

annually for more than 30 years, which is believed to be able

to boost Mongolia's economy.


13 Sep, 02:59 PM

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Jon Springer

Comments (1001) 

The link to the China Daily article (as quoted completely above) is below for the verification obsessed. The deal for "Tavan Tolgoi West" is officially annulled. It now goes all the way back to the beginning. This effects holders of BTU and CSUAY.PK that had a theoretical stake in something they now do not. It does NOT affect any other mining situation in Mongolia, or elsewhere, in my opinion, based on meetings I have had with folks in Mongolia the last two days:

If you reread my article, you would see that local sources had indicated to me that the deal for Tavan Tolgoi West falling apart was likely.

As Peter Epstein has pointed out, this property still needs to be developed and would not ramp up for some time. At the same time, China's demand for coal is massive. Thus, I don't believe this event materially effects any companies except those that lost a stake in this deposit and those who at some future date get a stake in this deposit, full stop.

It is 3:11 am in Mongolia, and I am tired, but hope this comment is clear.

13 Sep, 03:12 PM

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Jon Springer

Comments (1001) 

As of 5 minutes ago, I have added a long position in Origo Partners, OPP.L ( - only trades in London. 

Also, here is a (new, I think) 3 part CNN series on Mongolia:

(thanks to Golfitobob for the link)

15 Sep, 05:56 AM

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Peter Epstein

Comments (249)

Mongolian Government Endorses Chandgana Power Plant Project

2011-09-15 12:30:01.65 GMT



Mongolian Government Endorses Chandgana Power Plant Project

The ("Company") announces today that its Chandgana Power Plant Project ("Project") has been officially endorsed by the Mongolian Ministry of Natural Resources and Energy. The Mongolian Energy Regulatory Authority ("ERA"), in charge of power plant license issuance, has received the endorsement and is expected to issue a final response to Prophecy's license application in Q4, 2011.

The request for licensing of "Construction of Energy Buildings and

Installations", submitted by East Energy Development LLC, a wholly-owned Mongolian subsidiary of Prophecy, in April, 2011, was determined to be in full conformity with Clause 2 of Article 12, Energy Law. The company has undergone a rigorous power plant permitting process, which included Environmental Impact

Assessment approval by The Mongolian Ministry of Nature and Environment, and support from the Mongolian Scientific and Technical Council. The power plant will be built right next to Prophecy's permitted Chandgana Tal Coal Project.

Results from the Power Plant Feasibility Study by Evonik Industries and the Chandgana Tal Mine Study by Leighton Asia are expected in Q4 2011. In parallel, Prophecy has been in discussion with a number of potential Engineering, Procurement and Construction (EPC) contractors with the goal of finalizing EPC selection expeditiously after the power plant license is obtained.

Prophecy's cash position and equity holdings total over US $90million as of September 1, and the company expects to fully fund the Chandgana project studies through to project financing.

Prophecy appreciates the support from the Mongolian Ministry and the community at large. The company looks forward to making the Chandgana Power Plant a reality and helping satisfy Mongolia and the region's energy needs.

About Evonik

As the fifth largest producer of power in Germany, Evonik Steag operates nine coal-fired power plants. Outside Germany Evonik is contributing to the public power supply in the Philippines, Colombia and Turkey with three coal-fired power plants. The range of services of Evonik Steag covers the entire value chain of energy production from fuel to residue. Its core competencies include the planning, financing, construction and operation of highly efficient power plants for fossil fuels. For more information, visit

About Prophecy Coal

Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. The company has over 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia. Prophecy Coal's Ulaan Ovoo coal mine is in production and Chandgana mine mouth power plant is currently being permitted. Prophecy Coal is the controlling shareholder of Prophecy Platinum Corp (TSX VENTURE:NKL). Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Further information on Prophecy Coal can be found at

15 Sep, 08:54 AM

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Jon Springer

Comments (1001) 

Regarding Prophecy (PRPCF.PK). This power plant was discussed in some meetings I had Thursday (Sept 15) - had 5 meetings. I think Prophecy has come up in at least 3 meetings I have had going back to Monday. Everyone believes they are executing their business plan well. The plan is to sell their coal to Russia and within Mongolia as they are close to the Russian border. I cannot speak meaningfully about their profits and margins at this time. I just know when their name comes up, folks believe their execution is on-target or better.

Thanks for the news update Peter.

15 Sep, 06:24 PM

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Peter Epstein

Comments (249)

SouthGobi stock dropped like a stone today on heavy volume. I have yet to find a reason for the dip.

On another note, please ask about Aspire Mining if you get the chance.

Thanks! Keep up the good work.

15 Sep, 06:45 PM

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Jon Springer

Comments (1001) 

Weekly news roundup below:

1) The Washington Post, Bloomberg and everyone else catch up with the deal for “Tavan Tolgoi West” being rejected (where China Shenhua 40% and Peabody got 24% of the West Tsankhi part of the Tavan Tolgoi deposit). In fact, the news came out faster in the comments section here than several places locally in Mongolia – kudos to the folks posting here. 

2) Rio Tinto (RIO), co-owner of Oyu Tolgoi copper-gold mine wih Ivanhoe (IVN), is telling a group of 20 officials in the Mongolian government considering trying to take a bigger share of Oyu Tolgoi’s profits that they (the gov’t personnel) should not change previously made mining deals or they will put a lot of the country’s business at risk: 

3) Noise about the controversial Mongolian Rivers and Forests mining law possibly being repealed. This is something all should be aware of as it did come up in conversation with some guys from a mining company at a bar in Ulan Bator one night, and it does significantly impact the ability of some companies to operate (obviously including the one I spoke with who will remain anonymous since it was a social conversation over alcohol): 

4) The mergers and acquisitions market is heating up in Mongolia. Privately held Gobi Coal is being shopped around with a requst for offers by mid-October (this is not to be confused with SouthGobi Resources, a different company). Origo Partners (OPP.L), who also owns approximately 20% of Gobi Coal is seeking offers:
(at the bottom of the same article, there is two lines mentioning that Ivanhoe Mines is also shopping its 57% stake in SouthGobi Resources) 

5) As mentioned by Peter Epstein above, Prophecy (PRPCF.PK) gets government approval to build a power plant for its mine: 

6) A very Banpu (BNPJF.PK) friendly FT blog about the astuteness of Banpu’s takeover of Hunnu:
and another bullish comment on the acquisition: 

7) Brilliant article in the Australian that discusses the challenges for Xanadu (XAM in Australia) and Apsire (ASPXF.PK) “The trouble for Xanadu and Aspire is convincing the market they can overcome the infrastructure challenges in the region.” And, “The miners in southern Mongolia have so far not been able to direct their coal into Russia, forcing them to accept low-ball prices from Chinese customers well aware of their bargaining power.” 

8) Aspire (ASPXF.PK) digging: 

9) Ivanhoe Energy (IVAN) is drilling for and thus far not finding oil in Mongolia (this is related but not Ivanhoe that trades as IVN): 

10) Mongolia’s finance minister predicts per capita GDP will double in Mongolia by 2012 end of year (from $2,470 to $5,000). Video link is worth watching as the finance minister carefully frames and clarifies the situation:

11) Mongolia’s government issued bonds are selling well to-date. It is fairly recent that the government can issues bonds (since an accord with the Asian Development Bank concluded): 

12) A Rio Tinto (RIO) executive predicts a 40% rise in global copper demand by 2020. Also noted in the article in case we forgot, “The construction of [Oyu Tolgoi] accounts for close to 30 per cent of the nation's gross domestic product of Mongolia. The [Ivanhoe-Rio Tinto joint] Oyu Tolgoi project is forecast to start commercial production in the first half of 2013 and is expected to be able to produce 450,000t of copper and 330,000 troy ounces of gold annually.”:

Another article stating Oyu Tolgoi will be one-third of the Mongolian economy by 2020: 

13) Petro Matad (PRTDF.PK) has its licenses extended: 

14) Haranga Resources (HAR in Australia) is proceeding with drilling on its iron ore project:

15) Mongolian Resource Corporation (MUB in Australia) drilling for gold: 

16) Origo Partners (OPP.L) is launching a Mongolia Stock Exchange Liquidity Fund. Details in both of these announcements are close but not quite in line with my understanding of the fund based on conversations this past Thursday. I will fact-check back with them when forthcoming articles are in the pipeline: 

17) Interesting reading on Mongolia as a carry-trade destination – good article. (I believe most retail investors can get at least 10% on a one year CD at a bank (I’ve heard as high as 18% for institutional investors), 5 year government bonds are paying 12%, and a local current corporate bond issue is paying 16.2%):

18) President Ebegdorj is reaching out to Evidity Charimn General Wesley Clark regarding Envidity’s $1 billion Shivee oVoo Coal Gasification and Gas to Liquids project:;func=display&... 

19) Quirky photo-essay about Mongolia in Bloobmerg Business Week. Photo 4 is of Oyun Sanjaasuren, who is often interviewed by the western media due in large part to her reputation for candor, integrity, and being able to discuss both sides of policy decisions. Photo 7 of Munkhbyara Tsetsegee who is the leader of the Fire Nation movement that tries to curtail the impact of mining on the environment. Photo 9 is the CEO of MNGGF.PK in their prior office. Photo 11 is the stock exchange, but excludes the people at phone & computer banks both right and left of the columns: 

20) Gushing article about Mongolia’s economic and shopping growth by The Australian: 

21) The Diplomat explains why all roads are leading to Mongolia: 

22) The Italian Minister for Economic Development is leading a business mission to Mongolia this week: 

23) From China’s Xinhua news agency, Mongolia and China are vowing to strengthen ties: 

24) The U.N. released anti-corruption report cards (Finland, Spain, Mongolia and Uganda covered). Subscription required for this WSJ article, but the Mongolia results say nothing particularly noteworthy in my opinion:

Disclosure: I am long MNGGF.PK, OPP.L, and IVN

Articles on trip to Mongolia forthcoming after information gets compiled and fact-checked with sources. Thank you for your patience while I try to be as complete and accurate as possible for all parties.

19 Sep, 07:31 AM

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Valley Boy

Comments (1336) 

It sounds like other Asians are taking an interest in Mongolia's forests and deserts. If economic initiatives are directed to improving their forests at the expense of their deserts then there should be less severe dust storms impacting downwind countries such as Korea.

This should entice more foreign investment into Mongolia's economy. Some multinational companies are interested in preventing Mongolia's desertification.

19 Sep, 09:19 AM

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Comment (1)

One of the few worries here in Mongolia really is the lack of infrastructure.

21 Sep, 04:18 AM

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Jon Springer

Comments (1001) 

Greetings folks,

If you are looking to publish a 25-page series of articles on investing in Mongolia with numerous follow-ups, please get in touch with me as I have what you seek.

Apologies that I am behind on the weekly news round-up of Mongolian news, particularly in such a turbulent last 10 days. I have been working on and shopping articles gathered in Mongolia. And, I’ve had days dominated by travel this past Friday, Sunday, and Monday.

I will get to a more complete update of the news of the past week from Mongolia later today, as there’s one more 6 to 7 hour excursion today. However, one news item from the past week in Mongolia is causing random people at weddings and close relatives who aren’t investing at all to ask me what I think… 

There’s a slew of articles with variant data that some folks in the Mongolian government, now including the Mongolia Minister of Mining, are trying to change the government’s 34% stake in the Oyu Tolgoi copper-gold mine to 50% (the rest of the mine is owned by a Ivanhoe Mines (IVN) Rio Tinto (RIO) joint venture).
Bloomberg article I cite below:
Bloomberg, more recent:
The Australian:
WSJ (subscription required):
Montreal Gazette (more on IVN and CEO Friedland):
Options Monster (blog) that IVN options are bullish:
Financial Post:

My take:

The idea of renegotiating the agreement is a proposal by 20 Mongolian lawmakers (not a majority; about a quarter of parliament) at this juncture. There are elections in Mongolia next summer and Oyu Tolgoi which is ramping up toward production is a juicy item to pick on (keeping in mind that a fully producing Oyu Tolgoi will boost Mongolia's GDP by more than 30%). Rio Tinto's McRae has warned - and I agree - that the government would be shooting themselves in the foot if they go back and change the deal now. Furthermore, as there seems to be a global economic pull back, this would be a particularly bad time to discourage foreign direct investment in Mongolia. Thus, while I believe that this may be an ongoing topical election issue to gain some votes among those who think the government got ripped off in the Oyu Tolgoi deal, I think that ultimately the government will have the vision to realize future deals that could be negotiated on different terms depend on first honoring those deals they have made in the past.

A strong caveat of an opinion:

I have been asked if IVN is a value purchase here. I think IVN is very cheap here, but there are a lot of stocks that seem very cheap currently, yet global markets still seem quite unhinged. With all the market uncertainty of late I am reminded of the Keynes quote, “Markets can stay irrational longer than you can stay solvent.” So, indeed, I think IVN is cheap at these prices, but that doesn’t mean it can’t go down 50% more.

Disclosure: I am long IVN.

A more thorough update on other news of the week will come late today (probably after close of trading today). My apologies again for delays on news delivery due to travel and obligations.

27 Sep, 07:41 AM

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Jon Springer

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Delayed, but now present weekly news-roundup:

1) Number one this week is member of the government trying to change the government’s stake in Oyu Tolgoi from 34% to 50% as detailed above. 

2) Mongolia Mining Corporation (MOGLF.PK) is near completion of a paved road from its mine to China: 

3) Peabody (BTU) senior scientist received “Distinguished Environmentalist” award from Mongolia Ministry of Nature: 

4) TVN Corporation (TVN in Australia) may have a better thermal coal deposit than originally anticipated: 

5) Petro Matad (PRTDF.PK) reports drill results it is positive about: 

6) General Mining Corporation (GMM in Australia) gets coal exploration license in Mongolia:

7) C@ (CEO in Australia) is moving closer to coal licenses for mining in Mongolia: 

8) Garrison International (GITLF.PK)(GAU.V) has some legal issues pending in Quebec and Mongolia: 

9) Article on potential for nuclear energy in Mongolia. Ranks Mongolia #16 in world uranium deposits. Says that no uranium has been mined in Mongolia since 1995. The article’s author believes that the government’s Nuclear Energy Law of 2009 has discouraged foreign investment in the sector. State run Mon-Atom “is engaged in uranium development and nuclear energy projects.”: 

10) A Monday CNBC Asia interview with Masa Igata, CEO and founder of Frontier Securities, a Mongolian brokerage house. Mr. Igata recommends Remicon, Prophecy (PRPCF.PK)(PCY.V), Gobi and APU. Remicon, Gobi and APU only trade on the Mongolia Stock Exchange. Remicon is a concrete producer that was recommended by many local brokerages. Frontier is handling a secondary offering for Remicon; secondary offerings in Mongolia typically occur at a higher price than the stock’s last traded price in Mongolia. Prophecy was sited by many brokerages as having good management that was executing well; and Frontier research has recently cited that the company is undervalued vis-à-vis its cash position and 44% stake in Prophecy Platinum (PNIKF.PK)(NKL.V). Gobi is a leading producer of cashmere products in Mongolia. APU is the Mongolia market leader in alcohol production: 

11) Interesting blog to read for background information and sense of the place from the “coal rush town” in the desert around Tavan Tolgoi: 

12) Article, with a lot of data and numbers, on the government’s balancing act between good relations with foreign corporations investing in the country (mining companies included) while improving the Mongolia people’s opportunities and environment. 

13) The Mongolia Stock Exchange is getting help/management from the London Stock Exchange. They are currently working on making trading electronic: 

14) Germany considering strategic natural resource investments in Kazakhstan and Mongolia: 

15) An opinion piece on how much outside foreign advice should be involved in government policies and development (author advocates for more outside involvement): 

16) Mongolia’s President campaigns at the U.N. to create a think tank for Landlocked Developing Countries (LLDCs) and to base it in landlocked Mongolia:;t=Think+tank+for+land... 

17) Ulan Bator, Mongolia, rated among top two most polluted cities in world. (Its competition is Ahwaz, Iran.):

18) Mott MacDonald, an engineering and development consultancy (, has been engaged to advise the Mongolia Clean Air Fund: 

19) Mongolia seeks to set new Guinness Record for most wrestlers in a wrestling tournament with 6,002:

Disclosure: Long MNGGF.PK, OPP.L and IVN.

28 Sep, 12:03 AM

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Mercy Jimenez

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Jon, Your Mongolian news-roundup is quite a feast! Thanks so much.


28 Sep, 02:56 AM

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The fact that the Mongolian government is pushing to renegotiate their share makes the hair on the back of my neck stick up. It will be interesting to see how that proceeds.

29 Sep, 07:59 AM

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Jon Springer

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Elections are in June. This, to me, is a sign that Mongolia is indeed a functioning democracy. Only in a democracy do you get a group of politicians suggesting doing the opposite of a functioning policy simply because it will sound good to the people - ignoring the fact that the policy change, and perhaps even the debate, will undermine the fabric of the nation.

As for whether or not the original Oyu Tolgoi agreement was or was not fair: its irrelevant. The government must honor agreements it makes with mining companies. If there are mistakes made in some agreements, they should be learned from, and adjustments should be made to future agreements with mining companies.

If the government actually tried changing this agreement, mining companies will go find resources other places in the world to invest where they can rely upon the agreements made.

This is why I think this is just election year hot-air. Cool heads - who lead the coalition government - will prevail to leave the agreement in tact.

29 Sep, 08:24 AM

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