The Prize is Huge
If you believe in proportionality, look at the time invested by Mongolia, BHP, IVN, ETG, TRQ and SSL in the structuring of OT. They have scrapped, argued, bickered, arbitrated, taken hostages (Hotel Mongolia - remember that?), changed positions, reversed course, threatened, burnt main players in effigy in public demonstrations (RF, who would think he could rile people up like that?) brought in NGO’s on the one side to drag down the project on all kinds of anti-development grounds, or major global development banks on the other to secure it. In Mongolia the politics got so hot people were killed in riots. Several prominent people jailed over the years. Bullying legislators passed the sudden shake-down of the Windfall Profits Tax, blocked the sale of South Gobi Energy, stripped ETG of large landholdings through pressure.
The modelling of the mine and it’s economics in phases, the ceasing of dissemination of new exploration or resource expansion for years, always just enough to push forward but never the full picture. IMHO.
Call me a dreamer, I know I have been beating the same drum for 17 years ... there is more, much more upside and value there at and around OT than the market understands if you measure by market cap and trading interest.
Rio and the Mongolians have done a superb job of making the project look much riskier, and having less upside than is the case. Quite apart from the potential expansion of Hugo North both along strike and to further depth in high-grade gold and copper ore with extraordinary value, there is the monster Heruga which guarantees decades of additional resources. But what is most intriguing of all is what the geologists suggested as early as 2002 when the structure of the OT trend was being analyzed and they suggested exploration around the high-pressure emplacement of the copper-gold porphyry should look for shallow, high-grade gold and silver deposits in the halo areas as such are commonly seen elsewhere. Endorsed by the world’s leading academic geologists specializing in such deposits. ETG had been focussing on the X-grid to the immediate East. They stopped although a program of further drilling had been proposed, immediately following execution of the JV Earn-In Agreement back in 2004. Up North to the West on the JV, around the airport showings, and to the South and South-West, more targets. Out further West on Shivee West, Argo and other targets. Exploration was eventually shut down as if OT was a mature, fully explored property. Far from it, it remain a much major potential exploration camp. What is usual is such a large surrounding land package is consolidated in just two licence-holders, TRQ and ETG.
The thought had crossed more minds than just mine that discovery of a shallow high grade gold deposit was politically explosive. It is a scenario, not a fact, we don’t know if such a thing exists. But it could have blown up OT completely in being an asset of sufficient immediate value and cash flow it would justify a shut-down of development of the OT block caving mines indefinitely.
One has to wonder why everything has been so difficult, and why TRQ always reports/notes additional high priority exploration targets but does not have any ongoing exploration results. In 2006 ETG interpreted a deep drill intersection 1325mN of the JV line at HNE as having intersected the top of the same mineralized system. TRQ subsequently reported the HNE ore body was truncated by a boundary fault at approx. 700mN of the JV line. It’s right in the highest or close to the highest grades found in the whole of OT. No explanation of what the showing at 1325mN was, which would double HNE’s strike. Is it possible that whatever the fault, it is a limited displacement and the continuation can be placed using the stratigraphy in the holes drilled already? No discussion, no disclosure.
In the Feasability Studies for Hugo North they model the ore body conservatively, which has the effect of smoothing out grade, and diluting the high grade core by using cut-offs and large block modelling. The actual NSR’s on mining are likely to be substantially improved from the projection. IMHO only.
It is an asset worth fighting over, obviously. Mongolia has done their level best, tooth and nail all the way. Surely Rio, scouring the world for an enlarged copper portfolio, with lots of competition, and just denied Resolution in Arizona apparently, eyes the 49% of TRQ. The TRQ minority interest is too obvious a target. Do you believe TRQ will ever pay a dividend to retail? I don’t. It’s all about how far a bid can push up a buy-out price from the beaten-down levels maintained over most of the past 8 or 9 years. And not raising the expectations of any of Mongolia, ETG and the TRQ minority along the way.
If you have gone long as a minority holder - TRQ or ETG, you have to be pleased that the principal grudge match between Mongolia and Rio has delayed dealing with retail until now gold and copper prices are on a solid upward price trend. Won’t hurt us.
What next, Rio, what next?
cg