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A Mongolian Mogul - Part III

Jamul Jadamba is an entrepreneur focused on creating wealth through adding value. He's also a Mongolian national, which makes him uniquely qualified to address the opportunities and challenges his country faces.

We've been speaking to him for the last 2 days, and this final discussion focuses a bit more on what he is doing as an investor and business person to grow his wealth, and the wealth of his investors.

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Chris: Jamul, you've got a number of different projects you're involved in. Tell me about the project you're taking public shortly.

Jamul: The Black Hills coal project is within a Canadian company called Mogul Ventures Corp., and we are going to be filing an application with the Toronto Stock Exchange in the next couple of weeks. Once the Exchange approves, we expect that process will take 3-5 months - we certainly hope to be public by summer of this year. That process is ongoing.

In terms of various sectors, we're active in the resource space and Mogul Ventures is the most advanced of our projects. We have 43-101compliant resources; we have a company that's going public.

There are a number of other projects in base metals, iron, ore, and precious metals that we're looking to be able to close deals on in the coming months. We also have a very early stage grass roots exploration project in the oil and gas sector.

That basically covers the resource sector. I also think that real estate is going to be a bit of a no-brainer for Mongolia. You have an environment where GDP is growing 15%-25%, whatever number you want to put on it, on average over the next few years. Real estate prices are going to go up.

Currently Mongolian law allows only Mongolian persons, natural persons or companies 100% owned by Mongolians to own Mongolian land. I think there's a huge opportunity for myself and people like me to go and buy land in Mongolia, urban land in Mongolia and do development deals. Foreigners can own property so you can enter into a deal with a foreign developer and offer them long-term leases.

We have a portfolio of real estate projects that we're looking to develop. We're in the process of closing one such deal where we're proposing to build a 17-story hotel in one of the upscale districts of the city. We have a large plot of land where we're looking to build a convention centre, so that's section number two.

In any economy if you want to play a significant role, I think being involved in the financial sector is a must. At some point in time I would like to get into the banking side of the business. That's more in the future. It'd require obviously a deployment of larger pools of capital. So these are the areas that my group will be focusing on.

Chris: I would be interested to know more about that real estate deal, if you're looking for a few shekels Mark and I might be interested to have a look at that.

If we go back to the Black Hills project; I know that a lot of work had been done on that particular project by the Russians prior to your acquiring it. Would you care to just run through what's been done on the project in regards to site work, proving-up the concession, and how you acquired it.

Jamul: Absolutely. This is a pretty well-known project. There are really two deposits that we think are linked, where there are some drill holes as well. These deposits were discovered and drilled in the 60s and 70s. There were 137 drill holes sunk on the property. The known deposits are pretty shallow since in those days they weren't interested in coal below 100 meters, so they're really just down to that depth.

Out of the 137 drill holes on the property, they came up with a resource of 180 million tons of coal in one deposit, and another 80 million tons from the other outcrop. The historic resource on the project is somewhere around 260 million tons based on 137 drill holes, so that's a significant amount.

Chris: You say that they weren't interested in drilling too deeply. Was that because of technology? What was the reasoning behind that?

Jamul: The reasoning behind that is back in those days coal was very cheap and it just didn't make economic sense to go for coal, particularly in Mongolia. There are a lot of other deposits that are shallow so it just didn't make sense to drill any deeper. The coal was tested back in those days, hydrological work was done and it was demonstrated that there was enough water to operate a mine.

They also did a feasibility study according to the standards at the time for development of a million ton per annum, open cut mine for power plants.

A lot of historic work has been done. We acquired the project from a Mongolian company that has an exploration license. The company was looking for uranium and they weren't very much interested in coal, so my family acquired the project from them. We made a deal with some Canadians and sold the project to the Canadian company, Mogul Ventures, in exchange for cash and shares in their company. That's how we ended up in control of the project.

What we've done over the last nine months is hire SRK as our independent consultants to write a 43-101 report. We did a limited exploration program - 13 drill holes in September. Everything has been done to 43-101 standards. We assayed the cores and came out with a maiden resource, and we also achieved a significant milestone recently where we received all approvals and signatures for conversion of our exploration license into a mining license. This gives us a 70-year tenure on the project, extendible by another 40 years. That's also significantly de-risks our project because the timeline is extended, and we only need some limited amount of additional approvals to be able to build a mine there.

We are now in the position to go and get the company listed on the Exchange. We'll be raising some capital at that point in time and aggressively push forward with the exploration program.

Chris: Wow, you've taken a lot of risk off the table early on, you don't see that often in these types of deals.

Jamul: Exactly. But, we don't just have coal on the property. We have a very interesting copper and magnetite system that needs further exploration. Surface grades are very high, with some of the rock chip samples coming up with 6% copper. We would like to do some additional exploration and see if there are actual copper deposits to be discovered.

Chris: That's all under Mogul Ventures?

Jamul: Mogul Ventures owns all mineral rights within the 34,000 hectares of the concession. The mining license that Mogul Ventures is getting covers all minerals, so if we happen to discover copper we just have to write a feasibility study for the copper and we'll be permitted to mine the copper.

Chris: In terms of the geographic location, are you going to be able to access these resources and get them to market relatively easily?

Jamul: We are positioned quite favourably. We're only 90 kilometres south east of a regional hub and rail port, the town of Choir. It has the Trans-Mongolian Railway and loading facilities, storage and an excellent infrastructure. Choir is emerging as a transportation hub, with trucks and deliveries to mines in South Gobi. It's a pretty good location for Mongolia, which is a vast country with limited infrastructure. The topography is flat. You can easily build gravel roads, so trucking the 90 kilometres to rail is easy.

Chris: I guess you're not dealing with mountains and other treacherous or challenging terrain.

Jamul: Yeah, particularly the region we're in has a lot of similarities to Western Australia, for example. It's a bit colder (laughs) but we also don't have truck drivers making $200,000 per year, so it has its pluses and minuses.

Chris: Western Australia is booming, but remember they are literally tens of thousands of kilometres from their end users. Australia is at the forefront in terms of resources, but they have significant obstacles to overcome with respect to transportation, especially relative to Mongolian resources. The costs involved in getting resources from Western Australia by truck and rail to ports, and then shipped over to Shanghai are significant, certainly compared to next-day delivery from the Gobi.

Jamul: Well, the numbers speak for themselves. If you look at coal, Mongolian coal exports were basically zero 5-6 years ago. As of 2011 I think it's something like 22 million tons projected to grow to over 40 million tons in the next two years.

We probably will become a 100 million ton exporter in the next 13-14 years or so. The numbers will speak for themselves. Coal, in particular, even iron ore - we're closer to the market so we're likely to continue to be the low cost producer.

We have location being a favourable factor but also the deposits in Mongolia are different. In Australia and a lot of other places the easy, cheap deposits have been taken out 100 years ago. In Mongolia that's not the case.

Chris: Yeah, the fact that you had Stalinist rule for such an extended period of time has left the place untouched. Now you've got that trigger mechanism which has changed the political structure and the economic climate. It's really ramping higher and higher every day. The numbers are mind boggling when you look at them. It's really dramatic and unprecedented.

Jamul: When you compare Mongolia to countries in South America or Africa there's also one very big difference. We have higher literacy rates than even the United States. Basically we have a 100% literacy rate. Most kids complete their secondary education and then something like 18-20% of them proceed to post-secondary education. It's certainly a highly literate and increasingly educated population, which makes it quite different from comparable places around the world.

Chris: Indeed, very important. Also I think the overall political stability - as I mentioned before you have these tensions. Literally if you look across the world at frontier markets, a common theme is a country which is on the low end of the spectrum with regards to literacy rates, high levels of poverty and low education. They get exploited and then the tensions rise because hiring locals is problematic. If you're hiring a local as an "engineer," for example on an oil/gas project, and that local can't read and write then you've got a serious problem. Those are the issues that arise in Africa, but it's not an issue prevalent in Mongolia.

Jamul: Yeah, and because they are literate they're all politically empowered, so you simply cannot come into Mongolia and dispossess people. It's just not going to happen.

Chris: Jamul it's been a real pleasure speaking with you these last few days. We'll catch up with you again soon to see how things are progressing.

Jamul: Very good, Chris. Looking forward to it.

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Jamul did a great job of helping us understand a bit about Mongolian history (the real story), politics and international relations. We also got a glimpse of some of the opportunities he's looking to capitalise on.

Let us know if you enjoyed this series, and please feel free to refer a friend or ten!

Have a great weekend.

- Chris

"If you endeavour, the fate will favour you." - Mongolian Proverb

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.