Mongolia: An Economic Boom Investment Guide
Mongolia is a country with 3.1 million people under a parliamentary government sandwiched geographically between Russia and China. Its large resources underground, along with changes in its political climate, are making it the next hot country to invest in. There are major resource finds of coal and copper, as well as known deposits of gold, oil, molybdenum, fluorspar, uranium, tin and tungsten.
In 2010, the CIA World Factbook page on Mongolia has:
- GDP at $6.125 billion
- GDP composed of 15% agriculture, 31% industry, 54% services
- $3,600 in GDP per capita (this is what the CIA factbook says, although it is believed to be too high by my other sources)
- Market value of publicly traded shares: $1.1 billion (in 2010 compared to $430 million in 2009)
- Export partners (2009) 78.52% China, 9.46% Canada, 3.02% Russia
What will happen when natural resources double, triple, or quadruple GDP?
Consider those numbers from 2009 and 2010 against the following facts pointing toward economic growth in Mongolia:
Mongolia’s export relationship with and proximity to resource hungry China.
The copper mine at Oyu Tolgoi being constructed jointly by Ivanhoe (IVN) and Rio Tinto (RIO) is generating $2.3 billion in capital expenditure in 2011 alone, and at full production will generate an estimated $7 billion in copper and gold at current prices annually. Here you will find recently updated information from Ivanhoe.
The people of Mongolia are each being given the opportunity to own 538 shares in the Tavan Tolgoi coal mine (TT). The citizens will own 10% of TT; the government will retain 50% of TT for now; and 30% is to be available in foreign exchange IPOs in the next 12 months (Goldman Sach and Deutsche Bank are working on the IPOs which analysts believe could raise up to $10 billion (or 63% more than 2010’s national GDP). Here is an article with more detail (though numbers on the value of the Mongolian citizens' holdings are very high and seem to be in Mongolian currency but reported in dollars; more likely, each citizen will receive $150 - $500 in value for their 538 shares).
Oyu Tolgoi and Tavan Tolgoi are only two mines, there are many more. Look at the numbers for these two mines compared to the numbers for 2010 GDP. There is a significant fundamental shift in this economy coming.
This boom has been predicted and foreseen
Seeking Alpha authors have been writing about this coming change since 2009, and for perspective on this growth, I recommend their articles:
1) Lara Crigger of Hard Assets Investor writing that Mongolia would be the next big thing on September 1, 2009.
2) The Mad Hedge Fund Trader "The Next Big Asian Play is in Mongolia" Instablog September 9, 2009.
3) September 17, 2010, CLSA - a French research outfit cited for its quality in a recent New York Times article - pointed to Mongolia as noted in this article by Macro Man.
4) And John Polomny recently traveled to Mongolia and has written several articles on the country:
a) March 6, 2011 Instablog before his travels, "Mongolia, Are We at the Investing Tipping Point?"
b) April 28, 2011 Instablog after visting Mongolia.
A Mongolia ETF is coming soon
So, how can you invest in Mongolia?
Van Eck is launching a Mongolia ETF soon. We are still waiting to know how they will make up the portfolio. Will the majority of holdings be non-Mongolian companies doing business in Mongolia? Will the majority of holdings be companies that trade on the Mongolian Stock Exchange (MSE)? This is unknown at this time, and certainly the ETF has the flexibility to change over time as the MSE grows.
Here is a link to Van ECK’s SEC filing to form the Mongolia ETF.
If the ETF is not for you, what are the other options?
Publicly traded stocks on U.S. exchanges - a starter's list
- East Asia Minerals Corporation (EAIAF.PK) Diversified miner with properties in Indonesia (copper and gold) and Mongolia (uranium). Indonesian current events bear following in the mining sector for this stock.
- Erdene Resource Development Corp. (ERDCF.PK) Diversified miner with properties in Canada, Georgia, and Mongolia. Partnerships with Xstrata for coal production in Canada and Mongolia. Mining Kaolin in Georgia. Recent findings in Mongolia indicate copper and gold on site as well.
- Entrée Gold Inc. (EGI) Diversified miner with properties in Mongolia, the U.S., Mexico and Peru. Its Lookout Hill property surrounds the Oyu Tolgoi mine and is subject to joint venture with IVN.
- Ivanhoe Mines (IVN) Diversifed miner with properties in Mongolia, Australia, and Kazahkstan. IVN owns a 66% interest in Oyu Tolgoi copper-gold mine in Mongolia.
- Khan Resources (KHRIF.PK) Uranium miner that has had licensing problems with the Mongolian government recently.
- Mongolia Growth Group (MNGGF.PK) A CEO hedge fund manager investing in anything in Mongolia except mining to profit from Mongolia’s boom. Primary holdings are insurance company subsidiary, real estate, and cash at this time.
- Mongolian Mining Corporation (MOGLF.PK) Coking coal producer and exporter. From their website: “MMC is the closest coking coal producer to Baotou, the closest railway transportation hub providing access from Mongolia to the largest steel producing provinces in China.”
- Petro Matad (PRTDF.PK) – Focused on the exploration and development of oil property in Mongolia. The company website says, “It is the first substantially Mongolian owned company to list on an international exchange.”
- Prophecy Coal (PRPCF.PK) Two thermal coal mining projects in Mongolia. Their website says: “The company controls over 1.4 billion tonnes of open-pittable thermal coal in Mongolia (839 Mt Measured, 579 Mt Indicated) between 2 distinct deposits with power plant plans for its second deposit (Chandgana's) well under way.”
- Rio Tinto (RIO) Highly diversified global mining company, joint partner in Oyu Tolgoi copper-gold mine.
- SouthGobi Resources Limited (SGQRF.PK) Thermal coal mining in southern Mongolia. 57% owned by Ivanhoe.
- Xstrata (XSRAY.PK) Highly diversified miner with joint projects in coal with Erdene (ERDCF.PK) in Mongolia.
Information resources
Recommendations for information streams on Mongolia:
- Business Council of Monglia's website.
- Mongolian Economy blog.
- John Polomny on Seeking Alpha and John Polomny’s newsletter. In his newsletter, Mr. Polomny has discussed multiple companies in Mongolia that he has invested in, as well as notes on when to invest in them.
- Harris Kupperman’s website. Mr. Kupperman is CEO of the Mongolia Growth Group. He frequently blogs about Mongolia in general on his website, though he cannot discuss his company’s activity in this forum.
In 2010, the CIA World Factbook page on Mongolia has:
- GDP at $6.125 billion
- GDP composed of 15% agriculture, 31% industry, 54% services
- $3,600 in GDP per capita (this is what the CIA factbook says, although it is believed to be too high by my other sources)
- Market value of publicly traded shares: $1.1 billion (in 2010 compared to $430 million in 2009)
- Export partners (2009) 78.52% China, 9.46% Canada, 3.02% Russia
What will happen when natural resources double, triple, or quadruple GDP?
Consider those numbers from 2009 and 2010 against the following facts pointing toward economic growth in Mongolia:
Mongolia’s export relationship with and proximity to resource hungry China.
The copper mine at Oyu Tolgoi being constructed jointly by Ivanhoe (IVN) and Rio Tinto (RIO) is generating $2.3 billion in capital expenditure in 2011 alone, and at full production will generate an estimated $7 billion in copper and gold at current prices annually. Here you will find recently updated information from Ivanhoe.
The people of Mongolia are each being given the opportunity to own 538 shares in the Tavan Tolgoi coal mine (TT). The citizens will own 10% of TT; the government will retain 50% of TT for now; and 30% is to be available in foreign exchange IPOs in the next 12 months (Goldman Sach and Deutsche Bank are working on the IPOs which analysts believe could raise up to $10 billion (or 63% more than 2010’s national GDP). Here is an article with more detail (though numbers on the value of the Mongolian citizens' holdings are very high and seem to be in Mongolian currency but reported in dollars; more likely, each citizen will receive $150 - $500 in value for their 538 shares).
Oyu Tolgoi and Tavan Tolgoi are only two mines, there are many more. Look at the numbers for these two mines compared to the numbers for 2010 GDP. There is a significant fundamental shift in this economy coming.
This boom has been predicted and foreseen
Seeking Alpha authors have been writing about this coming change since 2009, and for perspective on this growth, I recommend their articles:
1) Lara Crigger of Hard Assets Investor writing that Mongolia would be the next big thing on September 1, 2009.
2) The Mad Hedge Fund Trader "The Next Big Asian Play is in Mongolia" Instablog September 9, 2009.
3) September 17, 2010, CLSA - a French research outfit cited for its quality in a recent New York Times article - pointed to Mongolia as noted in this article by Macro Man.
4) And John Polomny recently traveled to Mongolia and has written several articles on the country:
a) March 6, 2011 Instablog before his travels, "Mongolia, Are We at the Investing Tipping Point?"
b) April 28, 2011 Instablog after visting Mongolia.
A Mongolia ETF is coming soon
So, how can you invest in Mongolia?
Van Eck is launching a Mongolia ETF soon. We are still waiting to know how they will make up the portfolio. Will the majority of holdings be non-Mongolian companies doing business in Mongolia? Will the majority of holdings be companies that trade on the Mongolian Stock Exchange (MSE)? This is unknown at this time, and certainly the ETF has the flexibility to change over time as the MSE grows.
Here is a link to Van ECK’s SEC filing to form the Mongolia ETF.
If the ETF is not for you, what are the other options?
Publicly traded stocks on U.S. exchanges - a starter's list
- East Asia Minerals Corporation (EAIAF.PK) Diversified miner with properties in Indonesia (copper and gold) and Mongolia (uranium). Indonesian current events bear following in the mining sector for this stock.
- Erdene Resource Development Corp. (ERDCF.PK) Diversified miner with properties in Canada, Georgia, and Mongolia. Partnerships with Xstrata for coal production in Canada and Mongolia. Mining Kaolin in Georgia. Recent findings in Mongolia indicate copper and gold on site as well.
- Entrée Gold Inc. (EGI) Diversified miner with properties in Mongolia, the U.S., Mexico and Peru. Its Lookout Hill property surrounds the Oyu Tolgoi mine and is subject to joint venture with IVN.
- Ivanhoe Mines (IVN) Diversifed miner with properties in Mongolia, Australia, and Kazahkstan. IVN owns a 66% interest in Oyu Tolgoi copper-gold mine in Mongolia.
- Khan Resources (KHRIF.PK) Uranium miner that has had licensing problems with the Mongolian government recently.
- Mongolia Growth Group (MNGGF.PK) A CEO hedge fund manager investing in anything in Mongolia except mining to profit from Mongolia’s boom. Primary holdings are insurance company subsidiary, real estate, and cash at this time.
- Mongolian Mining Corporation (MOGLF.PK) Coking coal producer and exporter. From their website: “MMC is the closest coking coal producer to Baotou, the closest railway transportation hub providing access from Mongolia to the largest steel producing provinces in China.”
- Petro Matad (PRTDF.PK) – Focused on the exploration and development of oil property in Mongolia. The company website says, “It is the first substantially Mongolian owned company to list on an international exchange.”
- Prophecy Coal (PRPCF.PK) Two thermal coal mining projects in Mongolia. Their website says: “The company controls over 1.4 billion tonnes of open-pittable thermal coal in Mongolia (839 Mt Measured, 579 Mt Indicated) between 2 distinct deposits with power plant plans for its second deposit (Chandgana's) well under way.”
- Rio Tinto (RIO) Highly diversified global mining company, joint partner in Oyu Tolgoi copper-gold mine.
- SouthGobi Resources Limited (SGQRF.PK) Thermal coal mining in southern Mongolia. 57% owned by Ivanhoe.
- Xstrata (XSRAY.PK) Highly diversified miner with joint projects in coal with Erdene (ERDCF.PK) in Mongolia.
Information resources
Recommendations for information streams on Mongolia:
- Business Council of Monglia's website.
- Mongolian Economy blog.
- John Polomny on Seeking Alpha and John Polomny’s newsletter. In his newsletter, Mr. Polomny has discussed multiple companies in Mongolia that he has invested in, as well as notes on when to invest in them.
- Harris Kupperman’s website. Mr. Kupperman is CEO of the Mongolia Growth Group. He frequently blogs about Mongolia in general on his website, though he cannot discuss his company’s activity in this forum.
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