Focus On Mongolian Mining Corporation, Mongolia's Flagship Public Company

Part 1
This article is based on data from an interview with Mongolian Mining Corporation CEO Dr. Battsengel Gotov on February 13, 2012, data gathered attending Coal Mongolia 2012 February 9 and 10, 2012, trips by the author to Mongolia in September 2011 and February 2012, and a review of recent Mongolian Mining Corporation activity and news.

In two trips to Mongolia, I have met with eight different locally run brokerage companies and a host of other investment professionals. I always try to find out what companies they like, what companies they don't like, and why. From this informal survey, Mongolian Mining Corporation (MOGLF.PK) always scores the highest. The reasons cited for this acclamation sound almost boring: "they don't over-promise," "they always do what they say they are going to do," "they have good relationships with their customers," "there is good transparency in their announcements and reports," "it's a well run company."

Mongolian Mining Corporation is Mongolia's premier publicly listed company and its primary owner is Mongolia's largest private company. The company is intimately tied to the economy, politics and business practices of Mongolia, and this report seeks to cover these angles to provide a deeper perspective both on the company and its home country.

Meet The Children Companies, Meet The Parent Company

Mongolian Mining Corporation is the full 100% owner of Energy Resources LLC, which is best observed on the below ownership chart from Mongolia Mining Corporation. This is need-to-know information as articles about Mongolia frequently cite Energy Resources without mention of Mongolian Mining Corporation.


Click to enlarge this and all other graphics in this article. Source: Mongolia Mining Coporation.

The
biggest shareholder of Mongolian Mining Corporation is the company's
original parent, MCS Group, a privately held Mongolian based
conglomerate. MCS Group at last report owns 43.45% of Mongolian Mining Corporation. A quick perusal of the top 100 tax-paying companies
in Mongolia for 2011 will find the list littered with MCS and Energy
Resources subsidiaries at rankings 6, 13, 18, 23, 33, 43, 55, 64, 67, 73
and 77. The UB Post noted in a review of the very top of the top 100 companies:

MCS
was founded in 1993 as a small energy consultant; today it stands as
the second biggest company in Mongolia in terms of contribution to the
Mongolian economy and social responsibility. With 15 subsidiaries, it
has a diverse area of operation in the Mongolian economy such as energy
infrastructure, mining, cashmere production, food and beverages,
information communications, property development and general services.
Currently, the MCS Group employs over 3,000 employees. According to the
[World Bank's] International Finance Corporation
summary, MCS group will create permanent full time jobs for over 500
people each year with an additional 1,000 indirect jobs through its
contractors over the next 3 years. MCS Group is among the top tax-payers
of Mongolia, winning consecutive awards and recognitions from the
Mongolian Government since 1999. They include Best Company of the year,
Best Tax payer of the Year, Best Corporate Social Responsibility. The
company has remained at the second place in Mongolia's Top 100 companies
since 2005, behind only [state-run copper producer] Erdenet Mining
Corporation.

Moreover, MCS and Mongolian Mining Corporation take their roles in the society seriously. From distributing smokeless stoves to combat the pollution in Mongolia's capital of Ulaanbaatar to pursuing best environmental and sustainability
practices for their mines, the companies of MCS seem to be conscious of
being in a position to lead their country by example. They take on that
responsibility with the same effort they apply to improving
profitability. There is also the impression that those at MCS and its
subsidiaries recognize people outside of Mongolia will see what they do
as an example of how Mongolians do business and hold themselves to the
most exemplar standards.

A specific example that can be pointed to
regarding MCS's responsible development is real estate development
practices. In a conversation with one local real estate professional
about Ulaanbaatar's development, we were studying a wall-size map of the
city and looking at spaces left for development. Ulaanbaatar is a city
where a protected national park reserve now is covered with apartment
buildings and nearly every green area is owned by someone planning to
develop it. Unprompted, this real estate professional began comparing
the large Mongolian conglomerates use of land:

"See that, 30% of the land is green, that's MCS.
See that, no green space, that's [conglomerate X]
[points to another] No green space, that's [conglomerate Y]
[another] 30% green space, that's MCS.
[another] No green space [conglomerate Z]
[another] 30% green space, that's MCS.
[another] No green space [conglomerate X, again]"

This
conversation aided by the map continued for about 30 minutes.
Conglomerate X was the worst in the view of this real estate
professional and MCS was the best. For the record, the laws on the books
(which are generally ignored) say development of property in the city
are supposed to leave 30% green spaces, as MCS does. Meanwhile,
conglomerate X is believed to own the biggest green space left in the
center of the city.



Central
Tower, the building housing MCS and Mongolian Mining Corporation's
primary offices has green space on its land. Source: author's camera.

MCS
group's most recognizable subsidiary to westerners is Coca-Cola
Mongolia, which began under their management in 2002. Conversations with
people outside the company reveal that there was a learning curve after
MCS became a member of the Coca-Cola (KO)
family that ultimately drove the company to higher standards and more
sophisticated interactions with capital markets. The company was
well-run before, more globally savvy and astute after.


Mr.
Odjargal Jambaljamts, Chairman and CEO of MCS, who is also Chairman of
Mongolian Mining Corporation, celebrates Mongolian Mining Corporation's
IPO in Hong Kong. Source: Day Life.

Chairman
and CEO of MCS Group Odjargal Jambaljamts is widely believed to be the
wealthiest person in Mongolia and among Mongolia's handful of
billionaires. However, Mr. Odjargal and his companies have a reputation
for not being flashy organizations. When an elevator opens on any random
floor of MCS business operations, one sees a scene of sharp-dressed men
and women in suits moving with purpose. From casual conversation with
Mongolians from many backgrounds, a serious and hard-working ethic comes
from the top of the organization.

Meet The CEO of Mongolian Mining Corporation

In this recent interview on Bloomberg TV,
readers can meet Dr. Battsengel, CEO of Monglian Mining Corporation.
There is a culture clash in this interview between the televised
financial media that is geared to fast-talking boisterous sales and
marketing CEOs, and the culture of Dr. Battsengel and his company to
state only what is knowable or definitively possible to execute.

Mongolian
Mining Corporation's sales pitch is simple: they execute their business
as best as possible, period. In a vein Benjamin Graham would
appreciate, Mongolian Mining Corporation management assumes that markets
are rational and will recognize the value in their company sooner or
later. They leave that job to the markets, and focus on their job--
running the best business possible.

I first met Dr. Battsengel at
the Coal Mongolia 2012 conference where he was a distinguished speaker
during two sessions including the concluding panel discussion.

We
subsequently met for an interview at Dr. Battsengel's office overlooking
Sukhbaatar Square and the Mongolian Government Palace (where the State
Great Khural - Mongolia's parliament - meets). Dr. Battsengel is calm,
understated, and thoughtful in his responses to questions. Dr.
Battsengel is significantly taller than my own 6'2" (188 cm) frame. He
diplomatically answers questions related to other companies and
political developments. Many questions were answered by him with a
statement that can also be found on the company's website, in its
presentation and reports: the company works to be transparent with all
investors.

Location, Location, Location

The
rules of real estate often apply to mining as well. Proximity to
infrastructure and customers lowers the cost of doing business. By the
location of its primary Ukhaa Khudag mine (pointed out by the blue arrow
below), the natural customer is China (approximately, 250 km or 150
miles, from mine to border).

Ukhaa Khudag deposit, measuring 2,960 hectares in size, holds 497 million tons and 283 million tons of JORC-compliant
measured and indicated coal resources and proven and probable reserves,
respectively as of May 31, 2010. According to Wood Mackenzie, the vast
majority of our reserves are high quality hard coking coal, increasingly
high in demand at steel, iron mills and chemical plants across the
border in China.

From the Energy Resources LLC presentation at Coal Mongolia 2012. Blue arrow added by author.

However,
despite proximity to China, Mongolian Mining Corporation has tested
exports to other countries as well. By the numbers, transport costs per
tonne to respective countries:

• China = $23 (dropping to $20 with new roadways the company made and opened in 2011)


• Japan (via the port of Nahodka in Russia) = $170


• Germany (actually to a German company location in Poland) = $190

Relevant sale price per tonne:

• China = $155.60 (washed at Gants Mod, border town)


• Japan
  = $282 price agreed circa Q32012 (washed FOB Nakhodka, port in Russia;
  $282 was "comparable to Australia FOB prices at that time"; "current
  seaborne market prices are much weaker, 200-220 USD/t FOB Australia,
  making such distant shipments not economical at all")


• Germany =
  $345 circa July/August 2011 ($155 washed at FCA Choir, town connecting
  to Mongolian railway in Mongolia; plus $190 transportation cost; "345
  USD/t in July/August 2011, comparable to prices in Europe at that time;
  small amount, around 3.5kt (48 wagons) to Thyssen Krupp (TYEKF.PK); was a trial shipment, some loss in margins taken as an investigation cost")

From the Energy Resources LLC presentation at Coal Mongolia 2012.

Meanwhile,
it is believed that Mongolian market share of China's coal imports will
grow as China's need to import coal continues to grow as well. The
macro outlook for coal from Mongolia vis-a-vis the relationship with
China was previously discussed in an earlier article I wrote.

Dr.
Battsengel points out that China is a big producer of coking coal, but
on a per capita basis is still small, and demand for coking coal from
China is set to peak between 2015 and 2020. "Because Chinese demand is
increasing, we need to secure our market share. The market will be
there, no problem," he says. At the same time, Mongolia's coking coal
production is anticipated to start peaking in 2016 coinciding well with
Chinese demand.

Dr. Battsengel believes Chinese demand for coking
coal imports could grow up to 70 million tonnes and that by 2015
Mongolia could supply up to 50 million tonnes of that demand.


From
the Energy Resources LLC presentation at Coal Mongolia 2012. In the
first two pie charts, the rust-colored part of the pie chart sticking
out is Mongolia's share of the Chinese market. The prediction for 2015
is a 52% share of the Chinese market.

Part 2 - Transportation Issues

The Tracks Of A Transportation Drama

Going
back to 2009, Mongolian Mining Corporation has been prepared with a
feasibility study on a rail link to China. The railway to China from
near Ukhaa Khudag has been blocked by the national plan to develop the
railways spearheaded by a popular and charismatic politician who also
happens to be among Mongolia's five richest men.

To understand
this, a brief history is required. Mongolia became the 2nd communist
country in the world in 1921 and operated in close relationship with the
Soviet Union through 1991, before embracing democracy enthusiastically
since that time. As a result of its earlier history, Mongolia's rail
network is 50% owned by today's Russia and is Russian gauge. China's
railways are on the same international standard gauge found in Europe,
the U.S., Australia, and 60% of the world. The difference in which rail
gauge Mongolia uses for its links to China is between $30 and $60
million per year.


Source: Wikipedia.


From Mr. Enkhbaatar's presnetation for MINIS at
Coal Mongolia 2012. The second to last bullet point notes the cost of
changing from Mongolia's Russian gauge to China's standard gauge tracks
at the border is $30 million to $60 million per year.

Dr.
Battsengel would not address the various controversies and delays to
Mongolia developing its rail infrastructure in our meeting. However,
despite national elections this June, Dr. Battsengel believes
"construction for the rail project must start this year" and believes a
"decision will be made in the first half of this year."

While some
are concerned about over-dependence on China creating lower sales
prices for Mongolian resources, Dr. Battsengel views their Chinese
clients as "practical." The Chinese know if they squeeze the price of
Mongolian resources too much, Mongolians will turn elsewhere. Instead,
there is and should be a mutual relationship that is beneficial for both
sides.

Dr. Battsengel points out that when you look at the costs
of trucking compared to rail, it behooves everyone to make the rail
project happen. The "extra profits will stay in the country" and "higher
profits equals higher taxes" which Dr. Battsengel adds is "also good
for the country."

One presenter slide at Cola Mongolia 2012 titled
"Transportation Economics" posed the question: 100 trucks, 2 trains, or
1 vessel?

Mongolian Mining Corporation is confident Mongolia's
coking coal prices will be competitive winners against Australia, the
U.S., Canada, and Russia once railway connections are in place.

A Hundred Umbilical Cords To China

Mr.
Battulga Khaltmaa is the charismatic man behind Mongolia's national
railway plan. Mr. Battulga draws his wealth that places him among
Mongolia's five richest men from Genco Group. He is also a member of
parliament, and until a few months ago - when the Democrat Party
abandoned the governing coalition - the Minister for Roads, Transport,
Construction and Urban Development (shortened to Minister of
Transportation for remainder of this article). He is a leading member of
the opposition Democrat Party in Mongolia and among Mongolia's more
popular politicians, and businessmen.

Mr. Battulga's Genco
famously built a gigantic statue of Chinngis Khan (aka Ghengis Khan) one
hour's drive from Ulaanbaatar. The statue has a museum inside, and is
floodlit at night-- despite not being near any major town. It stoically
- and symbolically - faces China.


This is the face of the statue looking right at China. Source: Wall Street Journal; Andrea Fazzari.


Here's the statue with a car, so you understand how big it is. Source: Lonely Planet.


When
Mongolian Mining Corporation suggested they could build their own
railway to China, Mr. Battulga in his capacity as Minister of
Transportation advocated that this was a dangerous proposition that
could lead to reliance on China, Chinese dominance of Mongolia's capital
markets, and a hundred umbilical cords to China. People who live in
Mongolia occasionally note while retelling this story that only a few
years earlier, MCS's Mr. Odjargal had surpassed Mr. Battulga as
Mongolia's wealthiest individual. Other sources counter that Mr.
Battulga and Mr. Odjargal are on good terms as private citizens. In any
case, Mr. Battulga's plan to protect national security from a hundred
umbilical cords to China won over the parliament and is shown on the
next map.


A photo of Mr. Battulga superimposed with a red light and railroad tracks. Source: Zindaa.mn.


The
national rail plan spearheaded by former Minister of Transporation
Battulga. Notice that the yellow phase 1 focuses on a rail link to
Russia and only phase 2 develops links to China. Source: Washington Post.

A
serious problem with the national rail plan indicated above, which was
approved by the Mongolian parliament in June 2010, is that it was
supposed to begin in 2011 and it has not begun yet. As Dr. Battsengel noted in a separate interview with the UB Post
about subsequent iterations, "The official policies and papers covering
railway transports were passed in June 2011. But the implementations of
these policies are currently in a stalemate."

The current talk is
that phase 1 and phase 2 construction will occur simultaneously, but
neither phase is being executed yet. As Mongolian Railways is 50% owned
by Russia, Mongolia has set up a separate rail company to be 100%
Mongolian owned, or possibly in part a publicly traded company, for the future rail construction.

A Few Questions

Below is a map from a January 2010 World Bank presentation.
On the map you can clearly see Tavan Tolgoi (state run coal mine set to
IPO this year, or next year, with 6.4 billion tonnes of coal reserves;
currently ramping up to full capacity production), Oyu Tolgoi (the
massive Ivanhoe (IVN) - Rio Tinto (RIO) copper-gold mine that will begin production later this year; 34% owned by the Mongolian government), and Nariin Sukhait (owned in a joint venture by Mongolyn Alt, the next biggest private company tax payer in Mongolia after MCS Group).



The
reason you do not see Mongolian Mining Corporation's Ukhaa Khudag on
the above map is because it is actually part of the same deposit area as
the Tavan Tolgoi deposit. The next two pictures are from the
presentation of Erdenes MGL Tavan Tolgoi (Big TT) at Coal Mongolia 2012.
Big TT is the above-mentioned state-run company seeking to IPO 30% of
its shares internationally in Hong Kong and London later this year or
next year. Mongolian Mining Corporation's Ukhaa Khudag deposit is at the
top of both of these slides, a bit off to the right.




The
government - via Big TT - currently owns the "Bid Coal Block" (Western
Tsankhi) and the Eastern Tsankhi. The government plans to sell the
Western Tsankhi deposit, a bidding process in which Peabody (BTU) and China Shenhua (CSUAY.PK) have
been active, among others. There is another mine in the same area
listed on the Mongolian Stock Exchange which is referred to locally as
Little TT, to differentiate from state-run Big TT that owns the Eastern
and Western Tsankhi deposits currently.

The Oyu Tolgoi and
Big TT deposits - the largest undeveloped copper and coal deposits in
the country respectively - are supposed to jointly lead Mongolia's GDP
growth through 2020 and beyond.

At the Coal Mongolia 2012
conference four separate question and answer sessions began with a
member of the audience asking when railway infrastructure would be put
into place. Would tax revenues be higher if all these Mongolian
companies near the border could transport their natural resources to
China by rail instead of by truck? Yes. Would there be a risk that the
companies would then only export to China creating a non-competitive
environment for their resources? Yes, but... Could the additional tax
revenues from all these companies additional profits by selling their
resources to China via rail (instead of truck) thereafter be used to
build out Mongolia's rail infrastructure to be able to access other
markets via Russia? It seems likely.

Does the author fully
understand the geopolitical risks and negotiations of Mongolia, a
country with only two neighbors which happen to be Russia and China? No.
The Mongolian nation has been negotiating how to manage these two
relationships for a long time.

The bottom line question is why the
government - which owns the huge Tavan Tolgoi deposit that has been
intended for years to be the government jewel, which each Mongolian
citizen is to receive a pre-IPO share stake in; and which is to
internationally IPO to promote investment in Mongolia and raise money
for the government, as well as the state-run company - has not
coordinated rail infrastructure development with Mongolian Mining
Corporation when the two companies are essentially on the same propert.
Moreover, the IPO share price of Big TT would be much higher if the rail
infrastructure were already in place?

(On top of that, a rail
line to China's industrial center of Batou from the greater TT area
would go right by Oyu Tolgoi, 34% owned by the government, as well. Oyu
Tolgoi will begin production in the second half of this year without a
rail link to China in place.)

Nevertheless, Mongolian Mining Corporation Improves Transportation Conditions

One
thing pointed out by many local brokerages in Mongolia when we discuss
Mongolian Mining Corporation is that their relationship with Chinese
customers is excellent. Another thing to like is the company is not hung
up on waiting for the railroad infrastructure development that has
stalled in the halls of Mongolia's parliament. Instead, they have
aggressively expanded their trucking capacity and roadway capacity.
Their estimate suggests that projects completed in calendar year 2011
through January 2012 will save $6 per ton in transportation costs to
China going forward.


Source: Mongolian Mining Corporation 2011 Annual Results presentation (dated March 7, 2012).

While
focused on the cost effectiveness of exports to China, Mongolian Mining
Corporation understands the concerns of some members of government that
a diverse portfolio of customers is necessary to Mongolia's success.
Among Mongolian Mining Corporation's achievements for calendar year 2011
were successful export shipments to Europe in July 2011 and Japan in
December 2011.



Source: Mongolian Mining Corporation 2011 Annual Results presentation (dated March 7, 2012).

Part 3 - Growth Company

Growing Company

Bloomberg
noted on March 6, 2012, "Profit [for Mongolian Mining Corporation] rose
98 percent to $119.1 million last year, matching the average $118.7
million estimate of six analysts in a survey compiled by Bloomberg.
Revenue climbed 96 percent to $542.6 million, the Hong Kong-listed
company reported today." Following the release of the company's annual results, on March 12, Yiannis Mostrous, who has co-authored a book
on Asian investing with regular Seeking Alpha contributor Elliot Gue,
wrote a bullish article on Mongolian Mining Corporation. Previously, in
November 2011 I discussed Mongolian Mining Corporation at length in my
article overviewing the coal investment opportunities in Mongolia.


Source: Mongolian Mining Corporation 2011 Annual Results presentation (dated March 7, 2012).

Washing Up

A
big development in the company's profitability has been the on-schedule
construction of coal washing facilities. The second of three Coal
Handling and Preparation Plants [CHPPs] was commissioned in February 2012
bringing capacity up to 10 million tonnes per year. The third is to be
completed by early 2013. Each of three planned CHPPs - one of which is
operating since last year - are for processing 5 million tonnes per year
based on 6,000 operating hours at 850 tonnes per hour. They believe it
is possible to get efficiencies out of the CHPPs that will allow them to
process 6 million tonnes per year at each CHPP in the future.


Source: Mongolian Mining Corporation 2011 Annual Results presentation (dated March 7, 2012).

The
improved profits with the washed coal is noteworthy. It cuts down
transportation costs as only coal and no rock (or overburden) is
transported. There is more competition among customers for the washed
coal. The cost per tonne to wash the coal is $3 while the sale price per
tonne improves about 63% (e.g. from raw coal to China at $94.60 per
tonne to washed coal to China at $155.60 per tonne). Also, all the
washing plants are built for year-round operations (which is not always
the case for facilities in Mongolia, where winter temperatures go down
to minus 40).


Source: Mongolian Mining Corporation 2011 Annual Results presentation (dated March 7, 2012).

On
top of this, the Mongolian government is encouraging companies to
invest in the country and sell their product at higher prices. Thus, the
government royalty on the washed coal produced by Mongolian Mining
Corporation is lower than the royalty on raw coal, and the company can
claim back Mongolia's 10% VAT (value added tax) thus nudging profits
higher.

Strategic Acquisitions And Improvements

Last year, the company strategically acquired
the Baruun Naraan deposit, 30 kilometers (18 miles) away from Ukhaa
Khudag. Dr. Battsengel explains that with Baruun Naraan, the company was
"looking for a property close to production so we could ramp it up
quickly."


Gray
area is Mongolia. White area is China. BN = Baruun Naraan. UHG= Ukhaa
Khudag. Page 98, Proposed Issue of Guaranteed Senior Notes announcement by
Mongolian Mining Corporation, March 14, 2012 (this report is 100s of
pages with appendixes; dig in to the linked report for up-to the date
everything-you-need-to-know data).

The company is
investigating purchasing properties still in the exploration stage which
have higher upside. The company is in no hurry to expand its resources
and feels they have the next five years to look for opportunities to
purchase assets.

The next two tables show the production of
operating mines in the South Gobi of Mongolia in 2011, and the future of
those mines coming on line in the next few years. The third table shows
historical and forecast production of coal in Mongolia.


Key to table. UHG = Ukhaa Khudag, Mongolian Mining Corporation (MOGLF.PK),
NS = Nariin Sukhait, Qinhua-Mongolyn Alt joint venture, Small TT =
Little Tavan Tolgoi (listed on Mongolia Stock Exchange), OT = SouthGobi
Resources (SGQRF.PK), Erdennes TT = Big Tavan Tolgoi. Page 79, Proposed Issue of Guaranteed Senior Notes announcement by Mongolian Mining Corporation, March 14, 2012.


Key to table. Soumber = SouthGobi Resources (SGQRF.PK). Zeegt = Gobi Coal and Energy (to IPO this year in Canada), OT Underground = SouthGobi Resources (SGQRF.PK), BN = Baruun Naraan, Mongolian Mining Corporation (MOGLF.PK) Page 80, Proposed Issue of Guaranteed Senior Notes announcement by Mongolian Mining Corporation, March 14, 2012.


Page 80, Proposed Issue of Guaranteed Senior Notes announcement by Mongolian Mining Corporation, March 14, 2012.

In
the next few tables from the same report, there are few other things to
address. First, it is a misnomer that the company only produces coking
coal. Ukhaa Khudag has both hard coking coal [HCC] and thermal coal,
while Baruun Naraan is mainly producing semi-soft coking coal [SSCC]. I
will not go into the outlook for Mongolian Mining Corporation's thermal
coal in this article, as it is the coking coal that is the principal
driver of profitability. However, for a good overview of the thermal
coal sector in Mongolia, I recommend Leo Liu's article on regional energy demand around Mongolia.


Page 103, Proposed Issue of Guaranteed Senior Notes announcement by Mongolian Mining Corporation, March 14, 2012.


Ukhaa
Khudag Deposit overview. Page 101, Proposed Issue of Guaranteed Senior
Notes announcement by Mongolian Mining Corporation, March 14, 2012.


Baruun
Naraan Deposit overview. Page C19, Proposed Issue of Guaranteed Senior
Notes announcement by Mongolian Mining Corporation, March 14, 2012.

Mongolian
Mining Corporation continues to seek ways and means to grow. On March
14, 2012, the company announced they were proposing $300 million in
senior notes due in 2017," for the following purposes:

• for
  financing transportation infrastructure improvement and development
  projects, including, without limitation, for our UHG-GS railway project;


• for working capital and other general corporate purposes, including, without limitation, for exploration and debt refinancing.

We
may reallocate the use of proceeds in response to changing market
conditions or circumstances and other factors, including, without
limitation, the timing of our UHG-GS railway project"

UHG is the
company's shorthand for their Ukhaa Khudag deposit and GS stands for
Gashuun Sukhait, the town at the border crossing with China.

Outlook For Mongolia In Context



Projected
coal production by company in Mongolia. MAK is privately held Mongolyn
Alt. Hunnu is now a subsidiary of Banpu (BNPJF.PK). MEC is Mongolia Energy Company (MOAEY.PK). SouthGobi is SouthGobi Resources (SGQRF.PK). Erdenes Tavan Tolgoi is Big TT. MMC is Mongolian Mining Corporation (MOGLF.PK). Source: Trade and Development Bank presentation at Coal Mongolia 2012 by Randolph Koppa.



Rising demand in China. Source: Trade and Development Bank presentation at Coal Mongolia 2012 by Randolph Koppa.



Rising global demand. Source: Trade and Development Bank presentation at Coal Mongolia 2012 by Randolph Koppa.

Conclusion

As
several presenters at Coal Mongolia 2012 pointed out, Northeastern
Asian countries -- including Korea, Japan and China -- accounted for
nearly 40% of the 1 billion ton coal trade in 2011, and India is coming
along to join those countries in that demand.

Mongolian Mining
Corporation is well positioned to fully profit from marketplace demand
and geographically well positioned near China, where the greatest demand
is. The company continues to develop washing facilities, ramp up
operations, expand export efficiency, seek out strategic acquisitions,
and in many ways, find the means to improve profitability.

I have
made two trips to Mongolia and plan to return in the fall because
Mongolia is supposed to be one of the best performing markets to invest
in through at least 2020, and perhaps longer. The information one hears
from people locally is different than data you can read in the news
media. MCS Group and Mongolian Mining Corporation have positioned
themselves well to be at the forefront both of Mongolia's growing
economy, and leading examples of well-run Mongolian companies. I expect
Mongolian Mining Corporation to produce steady, reasonable and reliable
returns to investors over time.

Disclosure: I am long IVN.

Additional disclosure:
I will make an initial purchase of Mongolian Mining Corporation shares
one week after this article is published with an eye to accumulating
shares over time.

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