Opinion: Get Rich In The Land Of The Blue Sky

The story of Mongolia's resurgence is mouthwatering for investors for a very simple reason. Mongolia is rich in natural resources… and it sits next to the world's most voracious consumer of those resources, China.

Beneath Mongolia's rugged mountains and slumbering sands lie huge untapped resources of copper, coal, gold, uranium, iron ore, oil and more — only recently discovered. Already, Mongolia's exports are up 50% from 2009, swelling Mongolia's cash reserves to $1.8 billion.

But there is a long way to go. Production of coal, iron ore and crude oil should rise 10-fold over the next 10 years. As of now, the 10 largest deposits are worth over $1.3 trillion. For perspective, Mongolia has a $4.5 billion economy.

Oyu Tolgoi is one of those big deposits. It is a joint venture between Ivanhoe Mines and Rio Tinto. It is the world's largest new copper and gold mine, with some 80 billion pounds of copper and 46 million ounces of gold. Here is the mind-boggling part: This one mine will represent about 30% of Mongolia's economy when it starts producing. Just one mine!

Another big one is Tavan Tolgoi, which is in what may be the largest undeveloped coking coal district in the world, with more than 6 billion tonnes of coal. This is another multibillion project. They'll start building it sometime this year.

There are staggering piles of wealth for a nation of only 3 million people. Some believe these resources could turn Mongolia into another Qatar or Norway.

Qatar is an example of a country that got rich after exploiting a massive natural resource. In Qatar, it was natural gas. The Qatari stock market went from $4 billion in 1998 to $104 billion by 2010 — a 27-fold increase!

Another example is Kazakhstan, as Brad Farquhar, a correspondent and friend from Regina, Saskatchewan, points out. Farquhar is the co-founder and vice president of Assiniboia Capital. Farquhar has been making regular investing field trips to Mongolia, enthralled by the opportunity he sees there.

"The Kazakhstan stock market went from something like a billion-dollar market cap to $100 billion in eight years," he writes:

"Mongolia, I think, is on a faster growth track with a more diverse resource base. It also has better logistics than Kazakhstan to access markets in China, Eastern Russia, Japan and Korea. Plus, Mongolia is a free and open democracy… And the Mongolian stock market just surpassed the $1 billion market cap mark."

That stock market was the best performing in the world last year, up 125%. My guess is that is only the beginning of a long bull market. Eurasia Capital estimates that Mongolia will be the fastest-growing economy in the world over the next decade.

The Mongolian currency, the tugrik, was the second-best-performing currency last year against the dollar, up 9%. Farquhar sent me a neat little stack of fresh Mongolian tugriks. It's colorful money.

The blue-green five spot features S├╝khbaatar, an important figure from Mongolian's struggle for independence in 1921. On the reverse side is a pastoral scene of horses eating grass with mountains in the background.

"I went to Mongolia last summer," our correspondent continues:

"I came home convinced that the country will do incredibly well over the next decade…. In order to try it out myself, I opened an account on the Mongolian Stock Exchange in early November, and I have been searching out companies on other global exchanges that have significant Mongolian exposure. In the first four months, my own Mongolia-specific portfolio is up 84%, and I have some friends and colleagues clamouring to get in."

There should be other opportunities, too, outside of mining. Mongolia will need to double its power output in the next five years at a cost of at least $2 billion. It needs highways and railroads. All that mining will need water. Mongolia has water in deep aquifers beneath its deserts and there are northern rivers it could divert, but all this too costs money. Somebody has put all that together.

Mongolia has waited a long time for another turn at bat in a big game. In the 13th century, Mongolia was the seat of the largest territorial empire the world has ever known. The hordes erupted out of Central Asia, conquered Russia, China and most of the Middle East. (Only the powerful armies of the Mamluks of Egypt checked the hordes' advance at the Battle of Ain Jalut.) Pax Mongolica reigned until the arrival of the Black Death. As far as the rest of history goes, Mongolia hasn't registered much since.

Now, thanks to its mineral wealth, it looks like Mongolia will enjoy another turn on the big stage with the eyes of the world watching — and some getting rich, besides.

Sincerely,
Chris Mayer
Penny Sleuth

Source:www.istockanalyst.com






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