Yesterday we were speaking with 'Mogi', one of the sharp, young Mongolian nationals working to bring his country forward.
Today he'll give us some specific ways to invest and put our capital to work in the country.
Mark: So, tell us about your work at CPSI. The firm specializes in capital raising for mining and junior stocks, listed mainly in Australia, but doing business in Mongolia, correct?
Mogi: Yes, that's correct . CPSI was established in 2010 for two reasons: 1) to strategically service Mongolian investors who took part, or want to take part, in Mongolia related companies CPS raises capital for; and, 2) to target the growing high-net worth Mongolian investors with international investment ideas.
What CPSI does is represent CPS Securities, one of the best, if not the best, junior resource brokers in Australia, in Mongolia. Established in 2001, CPS Securities is owned by three equal partners, Tony Cunningham (NYSE:C), Jason Peterson (NYSE:P) and Paul Sharbanee (NYSE:S), and specializes in capital raisings for junior to mid-size resource-focused companies operating all over the world, like the US, Chile, Brazil, Indonesia, The Philippines, Ghana, South Africa, Madagascar, Republic of Congo, Morocco, and of course Australia and Mongolia.
Mark: Do you spend more time acting as a broker for clients, or working on banking deals?
Mogi: Well, we're not brokers per se at CPSI. What CPSI has is a referral relationship with CPS Securities where we act as their marketing agents in Mongolia. CPSI's initial role was to build CPS' Mongolian client base, and of course inevitably through that channel and other contacts we came across loads of interesting projects and you shall soon see the results in the future deals we handle.
Mark: We've received a lot of feedback from guys on the ground in Mongolia regarding the MSE. By now pretty much everyone knows that the LSE has been working on modernizing the MSE, and it seems to be going OK. Liquidity is the number one issue, with corporate governance and oversight also lacking a bit. Was this the reason you decided to work with companies listed elsewhere - but doing business in Mongolia? Maybe it's the best of both worlds that way?
Mogi: CPS' strength is ASX and that's how we've come to Mongolia, but MSE was always in our future plan, and we were fine with waiting for it to kickstart, as any successful emerging market does, which I believe this LSE contract and TT has brought. TT is just the beginning of real liquidity, which is Mongolia's test run for "Privatization" Take Two. And CPSI wants to be there when that happens.
Mark: Do you see the MSE ever realistically being able to compete for listings with places like Australia, Hong Kong and Canada? Do you think dual-listing will be mandated at some point?
Mogi: I actually think it WILL be able to compete, especially with Australia and Canada, and Hong Kong in the not so distant future. But then again, why does a company dual list, to diversify its client base, increase liquidity and I believe we'll see such a trend as well, also in the not so distant future.
Mark: I know real estate isn't your focus, but give us your impressions of the "boom" in UB. If you were interested in real estate in Mongolia right now, today, would you continue to look at UB, or would you go out to some of the mining towns and areas where the boom is just really getting started?
Mogi: I would continue to look at real estate as a viable investment, but only until the real estate "players" decide to start realizing gains. Right now it's a little too heated and the name of the game has always been, in any boom, to be lucky enough to exit at the right time.
It seems everyone always knows when it's hot, but never exactly when it bursts and that's something that will naturally happen. It's not helping that a whole generation of 20, 30 year olds are finally able to move out of their parents' nest, but on top of that we see speculators, especially with foreign money, pouring into the market. As with any speculator they always exit, right now we're only seeing inflow of capital and no exits, which soon enough will happen.
Mark: So, give us something to grab hold of. What are you following right now that we should really be looking more closely at?
Mogi: I thought you'd never ask. Perhaps it will sound like I'm plugging a product, but there's a reason why, because they've proven themselves - they can deliver. Garrison Capital, that's a name some might have heard, they are investors out of Australia that created names such as Voyager Resources, Hunnu Coal, and Haranga Resources. All stocks that CPS has raised funds for at various levels and continues to back.
The Hunnu Coal deal has definitely shown they can deliver, with the takeover by Thailand's energy giant Banpu last year at 9 times the IPO price in less than 2 years after listing. We expect to have a few more of Garrison's ventures, on top of our other Mongolian deals, on the pipeline this year.
To give you more details on the company specifics: Voyager Resources (ASX:VOR), a copper/gold play with a market cap of just $70M, which is consistently releasing some of the best copper results since OT and is now targeting several deep porphyry stocks that you would find in OT; Haranga Resources (ASX:HAR), an iron ore play with a market cap of just over $100M and an exploration target that could increase their JORC resources close to 300Mt, sitting right next to the Trans-Mongolian rail line and a 3Mt per annum producer with about 300Mt resource where state-owned China Investment Corp bought a one third stake for $700M in 2009.
CSP is now in the process of listing a tungsten exploration play called Eumeralla Resources, and Kumai Energy, CPS' 2nd Mongolian coal play after Hunnu Coal, and sometime mid 2012 a Mongolian oil exploration company called Wolf Petroleum, which currently has the title of the largest oil tenement holder in Mongolia.
So I would say for anyone looking at Mongolia to watch what these guys will create next, and rest assured CPS will be there with full access.
Mark: Well, we'll be there too then! Finally, tell us something that most people are missing about the big picture in Mongolia, from the perspective of a Mongolian.
Mogi: What I think that no one is covering or talking about right now is Mongolia's population. Yes, they talk about how you'll soon see 2.7 million people all becoming rich like Arab sheikhs, but then not writing about how and who is going to be teaching their kids, picking up their garbage, waiting on their tables, because what self-respecting sheikh would do that and still be called a sheikh.
As you know Mongolia is a little paranoid when it comes to foreign "intrusion" into our lives. There's a reason why the Chinese migrant workers here stay enclosed in secret camps, and wouldn't dare get caught in the general public. That's what I believe is the key to Mongolia developing steadily and smoothly. I'm not worried at all about infrastructure, we get the point already, I'm not worried about politics, we understand the ramifications now.
What the politicians now need to figure out is how to bring every Mongolian to a higher standard so that they won't feel threatened by a migrant worker building our schools, digging our resources, asking me whether I'd like my steak well done or rare, to which I'll answer "Medium rare, please."
Wow! That was refreshing... Mogi, while maybe not typical, is a great example of the young and up-and-coming generation of Mongolian's who are smart and motivated to help their country succeed. Anyone who knows anything about Mongolian history will tell you that betting against a Mongolian is never a good idea.
To get in touch with Mogi and find out more about his work with CPS, you can email him at: firstname.lastname@example.org
Chris and I are betting big. If you want to join us in Mongolia at the end of July to meet Mogi, Jamul Jadamba, Harris Kupperman, Eric Zurrin, Chris DeGruben, Lee Cashell and others, drop us a note and we'll sign you up! It may be the best investment decision you'll ever make!
"Action is the foundational key to all success." - Pablo Picasso
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.