RE:RE:RE:TRQ Q1 Kaboom EarningsIf you read the transcript for the quarterly earnings call, have a good chew on the Q by Craig Hutchison (TD) and Thibedeau’s answer. (I don’t know how the disseminate it - I read it on Seeking Alpha, searching TRQ)
Recalling the escalation of rhetoric in March and April by some Mongolian politicians like “Mongolia gets no benefit from OT so we should shut it down”, “we are going to void the IA” and other foolish threats, and Rio having laid out their five requirements for commencing the undercut to start the block cave (which can’t be stopped once started).
Rio likely didn’t want to make any statement concerning what they would do that could feed into election rhetoric, because the MPP are well-positioned to consolidate popular support, and the last thing Rio needed was to give opposition some statement they could use to inflame the voters.
Then consider that both Mongolia and Rio remain the most likely parties to take further equity positions and consolidate their hold on OT, as cheaply as they can. They are quite capable of sowing confusion in combination with some friendly manipulative trading to queer either or both of TRQ and ETG as it suits them. Maybe not forever if their earnings improve, but at least until the ownership structure and timelines is settled.
When the numbers underscored the leverage of the project to upside metals prices, it was so predictable they would find some sad sack, pessimistic rhetoric to run cover for a short beat-down of TRQ. It just doesn’t look or smell right, including the supposed distance apart the parties are in their various negotiations and disputes - all amped up because the stakes are high and long-term. The take-away for me is they are all engaged and struggling exactly because OT is so deeply undervalued and promising. The stakes are high.
Could there be a tense final stand-off? You bet. Would the pressure to reconcile and get the project ownership and structuring back on track be huge? You bet - especially for Mongolia which has no other economic engine to compare. Could the resolution have many pieces because you need to clean up TRQ and ETG in the process? Maybe. So what. People conclude complex multi-party negotiations around the world every day.
The bigger the fight, the more prolonged, the more twists and turns, the more it just confirms what some of us know ... the project is rare, valuable, has great promise of long life and profitability. And it is valuednleaving a great prize of upside on the table to be fought over at present.
Long, ridiculously long on ETG. That’s my bet come what may. A TRQ paper-swap might be one resolution to get ETG out of the way, the only wrinkle there is does Rio have enough of a position to maintain their majority above 50% of TRQ. They could always throw in a bit of cash as well to TRQ in a PP if necessary. 6 for 1? That would be a steal. I know, sounds crazy when they trade closer to 25 for 1 today. ETG has suffered this Rio bullying much worse than TRQ since being boxed out of the IA in 2009. The undervaluation is more pronounced.
GrumpyGent.
FMCDH!!!!